Grayscale bitcoin discount narrows with conversion to ETF seen as ‘inevitable’

investmentnews.com:

The world’s largest bitcoin fund is surging faster than the cryptocurrency itself as investors anticipate that an exchange-traded fund centered on the token could soon launch. 

The Grayscale Bitcoin Trust (GBTC) is trading about 14% below the value of its underlying holdings intraday, the narrowest such reading going back to 2021, according to data compiled by Bloomberg Intelligence. The discount stood near 50% earlier this year.

The shares of the trust have rallied much more than the digital asset itself this year, with GBTC gaining 164% and bitcoin adding about 71%. On Friday, the Securities and Exchange Commission declined to appeal an earlier positive court ruling for Grayscale.

The discount has narrowed significantly in recent weeks, as many analysts who closely follow the going-ons of the trust are anticipating that it will soon convert into an exchange-traded fund, something Grayscale has been saying for years it would like to accomplish. The odds of that happening moved in Grayscale’s favor after the crypto asset manager in August scored a legal victory in federal court in its conversion bid. 

“Approval of a spot bitcoin ETF looks inevitable at this point, given the court’s Aug. 29 ruling, the number of recent spot bitcoin ETF applications and the SEC’s engagement with them,” Bloomberg Intelligence analysts Elliott Stein and James Seyffart wrote in a note. “Billions in unlocked value” are at stake, they added. 

Excitement around potential ETF approval was evident Monday when a rumor sparked a roughly 10% rally for bitcoin after unverified sources said BlackRock had received the green-light from the SEC. Bitcoin reversed most of those gains after BlackRock debunked the speculation. However, the episode served as a