Grayscale Locked in Bitcoin ETF Conversion Battle With SEC, Analysts Weigh In

The crypto ETF (exchange-traded fund) space has been ignited by BlackRock’s spot Bitcoin fund filing. As a result, industry analysts have turned to Grayscale as it remains locked in battle with the Securities and Exchange Commission over its own fund.

A year ago, Grayscale launched an appeal against the SEC for rejecting its application to convert its Bitcoin Trust (GBTC) into a spot Bitcoin ETF. Now that BlackRock has filed, Grayscale may have a better chance of winning its case, according to industry experts. However, BlackRock could be the ultimate winner.

Experts Weigh in on Grayscale ETF Battle

On June 27, senior ETF analyst for Bloomberg, Eric Balchunas, commented on a prediction by senior litigation analyst Elliott Stein.

Stein said that Grayscale has a “70% chance of winning its lawsuit against the SEC over the company’s bid to convert the Grayscale Bitcoin Trust to a Bitcoin ETF, we believe.”

On the back of this prediction, Balchunas gave BlackRock a 50% chance of getting its spot BTC ETF application approved.

He said that the SEC may look more favorably upon the BlackRock application. This could be a way to “save face” by permitting an ETF from a “trusted adult TradFi” firm.

Moreover, Stein upped the odds from 40% based on oral arguments from three judges appearing to side with Grayscale.

The SEC and chair Gary Gensler “may be bracing for a loss,” he added. He said they could be “backpedaling” by making it seem meaningless by approving a spot Bitcoin ETF around the same time as the court decision in August.

Fellow Bloomberg financial analyst James Seyffart said the “language of the ruling will be key either way.”

In January, Grayscale filed a response in its legal challenge to the SEC. It claimed that their arguments for rejection over ‘market manipulation’ were illogical. Additionally, the firm stated that manipulation of spot markets would also apply to futures and the products the SEC has already approved.

The SEC rejected Grayscale’s bid to convert its GBTC fund to a spot ETF in December 2022. The regulator has yet to approve a spot-based fund in the U.S. It favors futures-based funds that do not have direct exposure to the underlying asset.

GBTC Discount Diminishing

Grayscale’s GBTC discount has been diminishing as confidence and renewed investment returns to the space.

Furthermore, the fund has been heavily discounted from spot BTC prices this year. It fell as low as -49% in December at the crypto market cycle bottom.

Presently, GBTC is trading at a discount of -29.8%, according to Coinglass data. It has improved significantly since the BlackRock filing on June 16.