The recent news of BlackRock filing for a spot bitcoin ETF has generated considerable excitement in the crypto market, with some enthusiasts even claiming it could mark the beginning of a new “crypto summer”. This development raises a pertinent question: what does the BlackRock ETF filing indicate for Grayscale? According to Avi Felman, the head of digital asset trading at GoldenTree, Grayscale could benefit significantly from BlackRock’s lead if it succeeds in converting its current structure into an ETF.
Currently trading at a 33% discount, Grayscale’s GBTC shares sell at a lower price than the underlying BTC because it is structured as a trust and does not provide asset redemption of its shares. This difference in prices has created some interesting opportunities in the market. If Grayscale joins BlackRock in launching a spot ETF, there could be reduced pricing deviation by enabling 1:1 equivalent redemption between GBTC shares and bitcoin.
On the flip side, the Securities and Exchange Commission (SEC) rejected Grayscale’s 2022 ETF application, which has led to an unresolved lawsuit. The recent surge in the GBTC price was catalyzed by the news of BlackRock’s bitcoin ETF filing and a number of institutional-scale filings. Jonah Van Bourg, Cumberland’s Global Head of Trading, however, expresses caution against banking on the discount, stating that GBTC will likely sell off again “at some point.”
Van Bourg’s reservations stem from his concerns about DCG, Grayscale’s parent company, as he argues that it isn’t clear if they are economically rational or more concerned with reputational factors. Grayscale doesn’t necessarily need to compete with BlackRock’s ETF but could instead benefit from it. Van Bourg suggests that, if approved, Grayscale might be better off buying its shares back at a deep discount, after which it could convert its trust into an ETF. This approach, while not the most reputable, could economically make sense for Grayscale.
Felman, on the other hand, believes that the probability of Grayscale resorting to such a move is “extremely low” due to legal and reputational implications. Grayscale’s focus appears to be on building a sustainable business rather than exposing itself to short-term cash generation and legal liabilities. However, as Felman admits, worse things have happened in the crypto industry. In any case, the BlackRock bitcoin ETF filing has sparked significant interest and debate around Grayscale’s future strategy and its potential impact on the cryptocurrency market.
Source: Blockworks
