The SEC Won’t Appeal Court Ruling Against Grayscale’s Bitcoin Trust Conversion
The Bitcoin (BTC) price briefly surged above $27,000 after reports emerged that the US Securities and Exchange Commission (SEC) will not appeal a recent court ruling. The ruling overturned the SEC’s decision to prevent Grayscale, a crypto asset manager, from converting its Bitcoin trust into an Exchange Traded Fund (ETF). The SEC had until midnight on Friday to appeal, but it chose not to. In August, the D.C. Circuit Court of Appeals deemed the SEC’s rejection of Grayscale’s ETF application as “arbitrary and capricious.” While the SEC could still reject Grayscale’s ETF application for other reasons, their decision not to appeal indicates a weakening resolve to block the passage of spot Bitcoin ETF applications.
Grayscale’s Bitcoin Trust Discount Narrows
Shares of Grayscale’s Bitcoin trust have been trading at a discount to its actual Bitcoin holdings since early 2021. However, if the trust is converted into an ETF, this discount would be eliminated by implementing an issuance/redemption model. This model would issue new shares during times of increasing demand and redeem them during times of decreasing demand, thus keeping the price steady and in line with Bitcoin. The anticipation of Grayscale’s conversion to an ETF has led to a significant narrowing of this discount in recent months. Some analysts view this as a positive sign for the bitcoin market and an indication of rising demand.
Potential Spot Bitcoin ETF Approvals
The Bitcoin price is currently consolidating just below $27,000. The news regarding Grayscale and the SEC highlights a familiar bullish theme for Bitcoin investors: the expected approval of spot Bitcoin ETFs in the near future. Coinbase analysts believe that these approvals are already partially priced into Bitcoin, which may limit the potential for further short-term gains. David Duong, head of research at Coinbase Institutional, argues that it is unclear how much more Bitcoin could outperform if a favorable SEC decision occurs. Additionally, macro headwinds such as high US inflation and anticipation of higher interest rates may prevent a breakout from Bitcoin’s recent trading range.
Hot Take: Bitcoin’s Future Potential
While the current Bitcoin price is over 60% lower than its all-time highs, historical trends suggest that it has the potential for significant gains. If the cryptocurrency follows its previous trajectory, it could surpass its all-time highs by a factor of 200x. As we enter 2024 and spot ETF approvals become a reality, along with excitement surrounding the Bitcoin halving and possible Fed rate cuts, the Bitcoin price may soar to new heights.
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