Why Bitcoin and big investors are becoming important these days

The American company Grayscale has today challenged a decision by the financial regulator SEC in court. The SEC rejected Grayscale’s request last year to convert its fund into an ETF. Grayscale hopes to reverse this decision.

Why does Grayscale want an ETF?

Grayscale has a Bitcoin fund where investors can buy stocks. However, Grayscale can reach a much wider audience if that fund is converted into an ETF called an exchange-traded fund.

These are investment products that make it easy for investors to invest in specific assets or asset packages. For example, you could also buy an ETF that includes all companies in the US Nasdaq 100 or S&P 500. In this case, it’s an ETF that Grayscale wants to store “physical bitcoin.”

This makes it easy for the average investor, but also for a lot of money, to invest in Bitcoin relatively safely. This way, they don’t have to maintain their own wallets or transfer their assets to untrustworthy exchange platforms.

The SEC does not want a grayscale ETF

However, the SEC does not want to believe this so far and considers the market very susceptible to manipulation. It is one of the reasons why the powerful regulator does not want to allow parties like Grayscale to market these types of products.

In late June 2022, the SEC rejected Grayscale’s request to convert the fund into an ETF. Grayscale’s lawsuit began in October and today both parties will appear in court to orally explain their case.

Both the SEC and Grayscale will present their arguments to U.S. Supreme Court justices. Grayscale’s team will argue that regulators followed no logic in rejecting it after approving several futures ETFs with similar risk profiles.

The SEC denied the request at the time on the following grounds:

“This order disapproves the proposed rule change as amended by amendment #1. The Commission believes that NYSE Arca has failed in its obligation under the Exchange Act and the Commission’s Code of Conduct to demonstrate that its proposal meets the requirements of section 6(b)(5) of the Exchange Act, which where relevant requires that the rules of a national stock exchange “are designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest”.

In other words, the SEC said that when the New York Stock Exchange offers trading in the Grayscale Bitcoin ETF, it exposes investors to manipulation and fraud.

FTX handles grayscale

Sam Bankman-Fried’s Takedown Cryptocurrency Exchange FTX Sues Grayscale More specifically, FTX’s sister company, Alameda Research, is suing Grayscale on behalf of FTX’s debtors.

The company is demanding that Grayscale pay crypto out of the fund, which could raise more than $9 billion.

Grayscale charges 2% per year for Bitcoin fund management and FTX thinks this is too high. FTX claims this percentage has stolen $1.3 billion from customers and is in violation of fiduciary agreements.

“If Grayscale reduced its fees and stopped improperly preventing redemptions, FTX issuer shares would be worth at least $550 million, about 90% more than the current value of FTX issuer shares today,” he said. FTX..

bitcoin stock discount

We talked about grayscale, and at the time of writing, you’re getting a 44.56% discount.

This discount is the difference between the current Bitcoin price and the fund’s share price. If you have to pay more, it is called premium.

The graph above shows the evolution of the GBTC premium or discount. Until March 2021, GBTC could only be bought with a premium, but since then the discount only seems to increase. In December 2022 there was a discount of up to 49%.

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