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Grayscale’s ETF Aspirations Get a Boost as SEC Abandons Appeal – Bitcoin Price to the Moon?

Joel Frank
Last updated: | 3 min read
Bitcoin Logo / Source: Adobe

The Bitcoin (BTC) price briefly vaulted back above $27,000 on Friday in wake of reports that the US Securities and Exchange Commission (SEC) won’t appeal against a recent court ruling that reversed its decision to prevent crypto asset manager Grayscale from converting its Bitcoin trust into an Exchange Traded Fund (ETF).

As per a Reuters report, the SEC had until midnight on Friday to appeal against the legal loss but decided not to.

Back in August, the D.C. Circuit Court of Appeals ruled that the SEC’s rejection of Grayscales ETF application must be reviewed, labelling it as “arbitrary and capricious”.

The SEC could still opt to reject Grayscale’s ETF application for different reasons than those reversed by the court.

But the decision not to appeal suggests the agency’s resolve to block the passage of Grayscale’s and potentially other companies’ spot Bitcoin ETF applications is waning.

That’s in fitting with a growing narrative in the Bitcoin markets that by early 2024, the SEC will have green lit a number of spot Bitcoin ETFs, with Wall Street behemoths like BlackRock, Fidelity and Vanguard all filing their own applications back in June.

GBTC to BTC Discount Keeps Narrowing

Since early 2021, shares of Grayscale’s Bitcoin trust, the largest such crypto product in the world, have been trading at a discount to its actual Bitcoin holdings.

A conversion to an ETF would eliminate this discount by allowing for the creation of a issuance/redemption model, with new shares issued in times of rising demand and then redeemed in times of falling demand to keep the price steady and level with Bitcoin.

Anticipation that Grayscale’s Bitcoin trust may soon be converted to an ETF means that this discount has narrowed sharply in recent months, however.

The discount was last around its lowest level of the year at 16.5%, having hit as high as 47% in February.

Some analysts are likely to view the narrowing of the discount as a positive sign for the bitcoin market and indicative of rising demand.

Bitcoin (BTC) Price to the Moon?

As of early Saturday trade, the Bitcoin (BTC) price is consolidating just below $27,000, roughly at the midway point between its 50DMA at $26,650 and its 21DMA at $27,160.

There wasn’t much follow-through to the latest Grayscale/SEC news, but it high lights a bullish theme that has become very familiar to Bitcoin investors in recent months – that of expected spot Bitcoin ETF approvals in the coming quarters.

Analysts at Coinbase recently argued that they view spot ETF approvals as now partially priced in for Bitcoin, which could signal that this theme is unlikely to provide much by way of near-term tailwinds.

“We think the divergence in the performance of bitcoin and other tokens shows that the potential approval of one or more spot bitcoin ETPs has already been partially priced in… That makes it less clear how much more bitcoin could outperform if a favorable US Securities and Exchange Commission (SEC) decision occurs,” argued David Duong, head of research at Coinbase Institutional.

Meanwhile, macro headwinds remain strong.

Following this week’s hot US inflation readings, US yields remain not too far from the multi-decade highs they hit earlier this month in anticipation of higher interest rates for longer from the US Federal Reserve.

That suggests that a breakout of Bitcoin’s recent multi-week $25,000-$28,000ish range may not occur any time soon.

But as we enter 2024 and spot ETF approvals become a reality and excitement about the Bitcoin halving and a possible Fed cutting cycle amp up, the Bitcoin price could well be headed towards the moon.

At its current price under $27,000 is still over 60% lower versus its all-time highs.

If the cryptocurrency’s history is anything to go by, Bitcoin could be headed well beyond these all-time highs, with gains in the region of 200x a strong possibility.