GBTC … here we go again!
A legal battle is brewing over the Grayscale Bitcoin Trust (GBTC), the largest Bitcoin fund in the world, with investors and hedge funds contesting for the $7.2 billion profit that could be unlocked if the fund’s share price traded up to its underlying net asset value (NAV).
While some investors see the discount as a bargain and want the discount closed, Grayscale Investments, the fund’s corporate sponsor, says it wants to convert GBTC into an ETF, but the Securities and Exchange Commission (SEC) has repeatedly denied fund company applications for ETFs that want to own Bitcoin directly rather than through futures.
Grayscale has sued the SEC to reverse the decision, and oral arguments are scheduled to start on March 7 in the U.S. Court of Appeals for the District of Columbia. A ruling allowing GBTC to become an ETF could open the floodgates to far more Bitcoin funds, something the SEC appears reluctant to allow, arguing that the spot Bitcoin market doesn’t have sufficient measures in place to prevent fraud and manipulation, and isn’t properly monitored, making a spot-Bitcoin fund vulnerable to manipulation and putting investors in harm’s way.
While the lawyers wrangle in court, hedge funds and other investors are trying to force Grayscale to give up management of the fund or find other ways to unlock the $7 billion.
The conflicts arise, in part, because Digital Currency Group, Grayscale’s corporate parent, has “substantial conflicts of interest” incentivizing it to maintain GBTC’s status quo. Grayscale’s CEO, Michael Sonnenshein, has said he will cut GBTC’s fees as soon as it becomes an ETF.
Source: Works Cited
Light, Joe. “Bitcoin’s $7 Billion Sunken Treasure.” Barron’s, vol. 103, no. 9, 2023, pp. 17. ProQuest, http://proxy.library.nyu.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Ftrade-journals%2Fbitcoins-7-billion-sunken-treasure%2Fdocview%2F2779943338%2Fse-2%3Faccountid%3D12768.
