Grayscale Investments LLC and the New York Stock Exchange have filed to convert the world's largest Bitcoin fund into an ETF, requesting permission from regulators at a time when the highly popular product is facing competition.
The application to sell the $40 billion Grayscale Bitcoin Trust (GBTC) arrives on the same day as the ProShares Bitcoin Strategy ETF (BITO) launches, becoming the first exchange-traded fund in the United States to participate in digital asset futures. While the Securities and Exchange Commission (SEC) has approved the debut of the derivatives-based product, it has yet to approve the type of structure employed by Grayscale, which directly holds the biggest cryptocurrency.
The submission by Grayscale opens the door for the SEC to reject or postpone the GBTC conversion application. The asset manager's chief executive officer, Michael Sonnenshein, has indicated that the business is "100% committed" to converting GBTC into an ETF as soon as US authorities allow it.
In August, Grayscale recruited a global ETF chief to help with those efforts. Sonnenshein believes that with the debut of BITO, physical Bitcoin ETF approval is simply a matter of time.
Sonnenshein said in an interview that “We are of the firm belief that because the futures and the spot pricing for Bitcoin are inextricably tied, that we have the willingness to allow or clear the way for a Bitcoin futures ETF in the market, and also clear the way for a spot ETF.” GBTC currently holds roughly 3.4% of the world’s supply of Bitcoin, according to Grayscale.
Grayscale would most likely benefit from the conversion since it would address a long-standing issue: the trust's discount to net asset value. Because shares in the vehicle cannot be liquidated in the same way that they can in an ETF, the product's price has traded below its underlying Bitcoin holdings for an extended length of time. However, it may also be viewed as a strategy to avoid obsolescence, with the introduction of Bitcoin ETFs threatening to divert assets away from a product that investors have endured owing to a lack of alternatives.