Bloomberg News reports that a three-judge panel comprising the District of Columbia Court of Appeals, Washington, stated that the SEC or Securities and Exchange Commission could have succeeded in fully explaining and giving a reason related to Grayscale’s products. It was ordered to review its decision for the same.
SEC versus Grayscale product
The Securities and Exchange Commission (SEC) was wrong in rejecting an application from Grayscale Investments. The rejection was related to creating a spot bitcoin exchange-traded fund. The same was revealed by a Federal Court ruling on Tuesday. This landmark victory showed the possibility of paving the way for the first-of-its-kind products.
Last time, the cost of the biggest cryptocurrency, Bitcoin, was up by 6%. It was at $27,858 after the news broke. Ether and favorite Dogecoin, the smaller digital assets, were found to retain the overnight advances. It reflected a wave of optimism sweeping across the cryptocurrency market as soon as the court ruling was declared.
A spot bitcoin exchange-traded fund would be tracking the underlying market price, offering investors exposure to digital assets without the need to buy the currency. The SEC, however, denied all proposed bitcoin exchange-traded funds, including Grayscale’s, citing that they fail to meet the bar related to market manipulation.
What does the ruling mean?
The ruling does not mean that the exchange-traded fund of Grayscale will be automatically approved. However, it is a boost for the industry that has survived over a decade and is trying to advance a product like Bitcoin ETF.
Positive reaction
After the ruling, the $17.4 billion Grayscale Bitcoin Trust rallied, the most since the last time it did in July 2021. The shares of the biggest Bitcoin portfolio surged by 17% Tuesday. It thus narrowed down the discount to the value of the fund’s underlying token holdings to approximately 18% compared to the shortfall of December, which was nearly 50%.
GBTC -Grayscale Bitcoin Trust
The GBTC has a closed-end structure, making it susceptible to bigger deviations from its NAV or net asset value. An exchange-traded fund would allow the shares to get created, and you will also be able to redeem them to keep pace with the net asset value. This prospect has given rise to several bets when discounts are shrinking.
The renewed interest was prominent by an increase in the trading volume in one year to the highest level. It registered more than 19 million shares while hands changed, as per data compiled by Bloomberg.
The biggest shareholders of the trust include Digital Currency Group, the parent of crypto asset manager Grayscale Investments LLC, Morgan Stanley funds. It also includes ARK Next Generation Internet ETF (ARKW), and portfolios of Horizon Kinetics LLC, investment manager.
