Grayscale, one of the largest cryptocurrency fund managers, has stated that it is trying to convert the Bitcoin trust GBTC into an Exchange Traded Fund (ETF) in order to solve its pricing problems. The exchange rate now has a 20% discount on its Bitcoin holdings, a fact that has worried many about the overall sustainability of their business model.
Grayscale Tips to Become an ETF
Grayscale, the world’s largest cryptocurrency fund manager, has stated that its Grayscale Bitcoin Trust (GBTC) is currently becoming an ETF to address some of the problems it is facing. Michael Sonnenshein, CEO of Grayscale, stated that converting GBTC to an ETF would solve many of the inefficiencies investors are currently experiencing in pricing.
The shares of GBTC, the Grayscale Bitcoin Trust, lagged well behind its digital counterpart this year, hitting lower lows during the sell-offs. This imbalance could negate the benefits institutional investors see in these types of vehicles with indirect exposure and move them to other more profitable investments.
However, Sonnenshein believes that converting GBTC to ETF could address this price imbalance. Sonnesheim spoke out in favor of it in an interview with Bloomberg, stating:
“We believe that looking at the arbitrage mechanism built into ETFs would eliminate any discount or premium at which stocks can trade relative to the net asset value of the product.”
A Bitcoin ETF could still be a long way off
However, becoming an ETF is easier said than done for Grayscale. While the cryptocurrency community has high hopes for the possibilities of a Bitcoin ETF after Jay Clayton left his position with the SEC, recent statements from Gary Gensler, the new chairman, seem to point in the opposite direction.
Gensler has publicly stressed that cryptocurrency markets could benefit from better investor protection. The institute also released a public statement last week announcing it would tighten controls on funds invested in Bitcoin futures markets.
Grayscale was one of the first companies to submit a Bitcoin-based ETF proposal in 2016. However, she withdrew the following year, citing the lack of a clear legal framework for bringing this product to market as the main reason for discontinuation. Several ETF proposals have been submitted this year, but the SEC has yet to provide a response.
What do you think of grayscale discount issues and your intention to become an ETF? Let us know in the comments below.
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