Jump to
Main Blog Regulation Grayscale wins SEC in spot Bitcoin ETF case

Grayscale wins SEC in spot Bitcoin ETF case

Pic 1

Yesterday, on August 29, the positive court ruling in the Grayscale vs. SEC case was definitely the main topic within the crypto community. The euphoria in the market and media is similar to the one that followed the court decision in Ripple vs SEC.

Let's dive into the specifics: what is Grayscale, the confrontation with the SEC, the recent court ruling, and the subsequent market reaction.

 

What is Grayscale

Grayscale Investments is a digital currency asset management company that was founded in 2013. In the same year, Grayscale launched its flagship product, Bitcoin Investment Trust (GBTC).

The Grayscale Bitcoin Trust (GBTC) holds Bitcoin assets. Buying the shares of GBTC means owning a piece of the trust, which contains some amount of Bitcoin. GBTC is traded on the stock market, making it accessible to a wider range of investors.

There are two interesting details about trusts like this one:

1) the share price can differ from the value of the asset it is secured by. When lower, it is a discount; when higher, it is a premium.

2) such instruments mainly attract large institutional investors, so the value of the premium or discount can reflect their interest in the asset.

The chart below shows the historical percentage of Bitcoin price to GBTC price.

Pic 2

Later, Grayscale introduced trusts for other cryptocurrencies, but the main focus was always on Bitcoin. The full list can be found here or at the screenshot below. There are also Ethereum Classic, Ethereum, Litecoin, etc.

Pic 3

The company initially bet on launching a spot Bitcoin ETF. However, at that time, it never came to life due to the lack of regulatory framework for such investments.
 

Grayscale’s problems with the SEC

In 2021, Grayscale faced some challenges when the trust's price traded at a discount due to easier access to cryptocurrency. In October, the company asked the SEC to allow it to convert GBTC into a spot Bitcoin ETF. Later, in June 2022, the regulator rejected the application, stating that this market is vulnerable to manipulation and dangerous for investors. Grayscale has filed a lawsuit against the SEC.

In December 2022, the SEC issued a legal report in the GBTC litigation, clarifying the difference between previously approved futures Bitcoin  ETF and spot Bitcoin ETFs. The position consists of three arguments:

1. These products contain different underlying assets: spot bitcoin vs. futures contracts/cash/cash equivalents.

2. These underlying assets are traded on different markets: spot Bitcoin ETF on uncontrolled crypto exchanges vs. futures Bitcoin ETF on the Chicago Mercantile Exchange (CME), which is controlled by the CFTC.

3. Due to the presence of regulatory agencies, the futures Bitcoin ETF market is less susceptible to manipulation than the price of spot Bitcoin, which is traded on uncontrolled platforms.
 

The court ruling in Grayscale vs. SEC case

According to the August 29 filing, the court decreed that the SEC must reconsider the application to convert a GBTC trust into a spot Bitcoin ETF. The ruling was handed down by US Court of Appeals District Judge Neomi Rao.

In March, during oral arguments, Judge Rao said that the SEC had "offered no explanation" for Grayscale’s dismissal.

The ruling does not guarantee the listing of a grayscale spot Bitcoin ETF; it only obliges the SEC to review the application. The regulator can reject it again, just as it does to other applications for spot Bitcoin ETFs. However, all that has not stopped the euphoria in the crypto market.
 

Market Reaction on Grayscale win

Bitcoin reacted with a strong growth of 5.5% over the past day. Amidst the news, the price reached $28,142. Subsequently, the price dropped, and now BTC is trading at around $27,400. 

Pic 4

ETH has grown by 4.5%, reaching $1,745. Currently, the price is about $1,718. In general, the whole market is "green".
 

You might also like:

SEC vs. XRP: a new milestone in the case

What is a spot bitcoin ETF, and why does everyone talk about it?

Buy BTC

Buy ETH

Maria Kachura
Maria Kachura

Visit her on Facebook or hit her up via Email.

0
Share this post
Similar articles
Best investment options for 2023
Markets
16 February, 2023
Best investment options for 2023
Let’s explore all the pros and cons of currencies, cryptocurrencies, stocks, real estate, and precious metals.
The difference between coin and token: understanding crypto assets
Learn
24 April, 2024
The difference between coin and token: understanding crypto assets
Discover the key differences between coins and tokens in the cryptocurrency ecosystem. Learn about their features, roles, and examples in this comprehensive guide.
NFT NYC 2022!🌐🦄
Events
20 June, 2022
NFT NYC 2022!🌐🦄
NFT NYC 2022.
AIBC Americas 2022
Events
8 June, 2022
AIBC Americas 2022
AIBC Americas 2022.
ETH NEW YORK 2022 🌐🦄
Events
24 June, 2022
ETH NEW YORK 2022 🌐🦄
ETH NEW YORK 2022.
Top 5 NFT games in 2024: the future of blockchain gaming
Learn
19 June, 2024
Top 5 NFT games in 2024: the future of blockchain gaming
In this guide, the itez team has gathered the freshest and most exciting information about the Play-to-Earn (P2E) segment and NFT games.