• The Grayscale Bitcoin Trust (GBTC) wants to convert its $14 billion fund to a spot ETF market amid increased regulatory scrutiny following the FTX and Alameda collapse.
• The GBTC discount to Bitcoin is trading around $13.80 on Wednesday, up approximately 57 percent YTD.

A panel of judges in the District of Columbia Court of Appeals in Washington grilled the United States Securities and Exchange Commission (SEC) over last year’s rejection to allow Grayscale to convert its Bitcoin Trust Fund (GBTC) to a spot Bitcoin ETF. The panel of Judges questioned the logic used by the SEC in rejecting Grayscale’s bid to convert its Bitcoin Trust to an ETF that tracks the spot market since the agency has previously approved Bitcoin futures products.

A closer look at Grayscale oral arguments

The oral arguments that happened yesterday with Grayscale, a subsidiary of Digital Currency Group, wants its application for a Bitcoin spot ETF approved. According to Grayscale, there is a growing demand for Bitcoin’s Exchange Traded Funds (ETFs) from institutional investors seeking cryptocurrency exposure. Judge Neomi Rao stated;

It seems like it’s fine for an agency to say okay, we need some more information, but it seems there’s quite a bit of information here on how these markets work together, and the SEC has not offered any explanation… that the petitioners here are wrong,

Grayscale’s lead counsel Donald Verrilli Jr., an Obama-era U.S. solicitor general, told the panel of Judges in court that a spot Bitcoin ETF would better protect investors because it would give them the benefit of oversight based on the surveillance agreements set up with the Chicago Mercantile Exchange, where bitcoin futures trade.

Emily True Parise, senior litigation counsel for the Securities and Exchange Commission, told the panel of Judges in court yesterday that the SEC lacks data to determine whether those surveillance agreements could also pick up potential fraud and manipulation in the spot markets.

The evidence is just mixed at this point. It’s bi-directional sometimes,

GBTC market outlook

The Grayscale Bitcoin Trust (GBTC) wants to convert its $14 billion fund to a spot ETF market amid increased regulatory scrutiny following the FTX and Alameda collapse. According to the company’s chief executive officer, Michael Sonnenshein, the ongoing lawsuit against the SEC will conclude this fall. As a result, other companies seeking a spot ETF approval from the SEC will get their verdict from the ongoing lawsuit.

With the panel of Judges seemingly siding with Grayscale due to insufficient reasoning from the SEC, the GBTC price has been on a rising trend despite the crypto bearish sentiment. According to trading data provided by TradingView the GBTC price is down over 49 percent in the past year, following the 2022 crypt bear market.