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The Grayscale Bitcoin Trust (GBTC) experienced an uptick in activity recently, recording its highest level of trading in more than a year. The surge happened after a U.S. federal appeals court mandated that the Securities and Exchange Commission (SEC) reconsider its earlier decision, which had rejected Grayscale's bid to turn its existing bitcoin fund into an exchange-traded fund (ETF).
Grayscale's Bitcoin fund currently oversees around $17 billion in BTC assets. The parent company of Grayscale, DCG, also operates CoinDesk. The recent court ruling has set the stage for a new chapter in the saga between Grayscale and regulatory authorities.
According to data from Yahoo, nearly 20 million GBTC shares were traded, the highest activity since the crypto market's downturn in June 2022. The share price of GBTC also spiked by 18%, reaching almost $21—its highest value since Bitcoin was at $31,000 in mid-July.
This sudden market movement also had a favorable impact on Bitcoin itself, with its value rising 7% to $28,000. Furthermore, the difference between GBTC’s share price and its underlying bitcoin assets shrank to just 17% during the trading period.
Previously, the gap between GBTC's market price and the intrinsic value of its bitcoin holdings has been a topic of interest for investors. Notable failures, like the collapse of crypto hedge fund Three Arrows Capital, which had aggressively exploited this price gap, are still fresh in memory. Data by CryptoQuant revealed that the gap had widened to 45% after the implosion of crypto exchange FTX.
On the flip side, certain investors had been acquiring GBTC shares over the past several months, speculating that a favorable court ruling would close this gap. Doug Schwenk, the CEO of Digital Asset Research, disclosed in a note that these investors are now cashing in as the gap narrows.
Schwenk also pointed out that trading could yield a nearly 25% return due to the closing gap, in addition to any market gains on bitcoin itself, making the investment particularly appealing for those seeking arbitrage opportunities.
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