Tuesday’s Ruling Opens Door for Grayscale to Convert GBTC into Bitcoin ETF
Tuesday brought a decision felt throughout the cryptocurrency ecosystem. The United States Court of Appeals ruled that Grayscale can convert GBTC into a spot bitcoin exchange traded fund.
Victory Over the SEC
The ruling represents a victory over the Securities and Exchange Commission (SEC) and could pave the way for the commission to finally approve spot bitcoin ETFs — an asset that’s long been desired by but unavailable to U.S. market participants.
Rally in Bitcoin and Crypto-Adjacent Equities
The ruling sparked a sizable rally not only in bitcoin, but in GBTC and various crypto-adjacent equities and ETFs. For example, the Invesco Alerian Galaxy Crypto Economy ETF (SATO), in which GBTC is the largest holding, surged 12.81% yesterday, confirming the fund’s sensitivity to important crypto headlines.
GBTC is the largest of SATO’s 36 holdings. Many of the ETF’s member firms lever themselves positively to a US spot bitcoin ETF. Those include a slew of bitcoin miners and crypto exchange operator Coinbase (NASDAQ: COIN). Coinbase is a top 10 holding in SATO, accounting for 4.81% of the fund’s roster.
Experts Bullish on Ruling
There are still moving parts regarding the fate of spot bitcoin ETFs in the U.S. This includes when the SEC will take up the matter and how many of those products will come to market. Still, experts are constructive on Tuesday’s court decision and its implications for spot bitcoin ETF possibilities.
“It’s excellent that the judge in the Grayscale vs SEC case was able to see the obvious correlation between Bitcoin futures and spot price. Products like Grayscale’s holdings have converted to ETFs in other commodity markets, and it makes no sense to treat crypto differently,” said Greg Moritz, Chief Operating Officer at AltTab Capital, in a statement. “Rules for financial markets need to be based on data, not arbitrary and capricious sentiment toward a legitimate and growing asset class.”
It’s likely the SEC will appeal the Tuesday ruling. Still, some market observers believe that will be a fool’s errand. In a positive for SATO, experts believe that the SEC will lose the appeal; spot bitcoin ETFs are inevitable in the U.S.
“We don’t believe the SEC will act as kingmaker and the most likely outcome is a block approval of applications that meet requirements, probably in Q1’24,” noted Tim Bevan, CEO at ETC Group. “The level of pent up institutional and retail demand in the US is significant and we expect this to have a positive impact on the price of Bitcoin as can be seen from today’s price reaction, as well as further accelerate the global trend towards acknowledging crypto as a new asset class.”
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