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Grayscale Bitcoin Trust Discount Shrinks to 10.35% as ETF Hype Persists

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The hype surrounding ETFs has helped narrow the discount on the Grayscale Bitcoin Trust (GBTC) to its lowest levels since July 2021.

According to data from YCharts, the discount on GBTC compared to its net asset value currently stands at 10.35%, marking a significant reduction from the record discount of nearly 50% during the crypto winter induced by FTX in December of the previous year.

The shrinking discount comes amid reports that the US Securities and Exchange Commission (SEC) has engaged in discussions with Grayscale Investments regarding the conversion of the trust into a spot Bitcoin ETF. 

If successful, this move would generate significant market momentum and liquidity.

GBTC is a publicly traded investment vehicle operated by Grayscale Investments, a subsidiary of Digital Currency Group. 

GBTC was created to provide investors with exposure to Bitcoin without actually needing to buy and hold the cryptocurrency themselves.

One notable characteristic of GBTC is that its shares often trade at a premium or discount to the net asset value (NAV) of the Bitcoin it holds. 

The premium or discount is influenced by supply and demand dynamics in the market. 

When demand for GBTC shares is high, the price can trade at a premium to the NAV, and when demand is low, it can trade at a discount.

Investor enthusiasm surrounding the potential approval of a spot Bitcoin ETF in the US has contributed to an all-time high in Bitcoin fund holdings, with total inflows surpassing $1 billion this year.

Last week, market sentiment received an additional boost when BlackRock, a giant in fund management, announced its plans to launch an Ether-based ETF. 

The news propelled Ether to a seven-month high, outperforming Bitcoin.

In addition to the ETF hype, trading activity on decentralized exchanges (DEXs) has reached a six-month high. 

Traders are reallocating their investments from altcoins into Ether in anticipation of potential ETF approvals.

Institutional Investors Are Coming to Crypto

As reported, the regulated derivatives marketplace Chicago Mercantile Exchange (CME) has dethroned Binance as the largest Bitcoin ( BTC) futures exchange.

The shift marks the first time in two years that CME has claimed the top spot.

CME’s gradual ascent to the top position throughout this year underscores the growing demand from institutional market participants seeking to trade the largest and most established cryptocurrency.

Furthermore, the cryptocurrency market continues to pull strings of outsized inflows in recent weeks as investors set sights on spot ETFs.

Last week, digital asset investment products had $261 million in inflows, representing the sixth consecutive week of inflows for a total of $767 million, surpassing the total inflows of $736 million seen in 2022.

“This run of inflows now matches the July 2023 run of inflows and is the largest since the end of the bull market in December 2021,” said James Butterfill, head of research at CoinShares.