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FTX's Potential Impact on GBTC Discount

Published: Oct 27, 2023 | Last Updated: Oct 27, 2023
Moyi Dang
Grayscale Logo
Image: Grayscale Logo

FTX's careful approach and GBTC's potential conversion to a spot ETF are key factors to consider

The recent news of FTX, a major cryptocurrency exchange, planning to liquidate its holdings of Grayscale's Bitcoin Trust (GBTC) has sparked a discussion on the potential impact on the price of the fund. FTX currently owns around $417 million of GBTC and has expressed its intention to trade the assets carefully to avoid crashing prices.

FTX's Impact on GBTC Discount

GBTC is the world's largest crypto fund and has seen its discount to net asset value (NAV) narrow to around 15% recently. The discount refers to the difference between the market price of GBTC shares and the value of the underlying Bitcoin assets. A smaller discount is generally seen as positive for investors as it means they are buying the shares for closer to their actual value.

FTX's decision to sell its holdings has raised questions about what will happen to this discount. However, the careful approach FTX plans to take in selling its holdings is seen as a positive sign for those hoping the fund's discount to NAV won't be significantly affected.

GBTC's Potential Conversion to Spot ETF

Another factor that could impact GBTC's discount is the possibility of the fund converting to a spot ETF. An ETF, or exchange-traded fund, is a type of investment fund and exchange-traded product that is traded on stock exchanges. GBTC's conversion to a spot ETF would allow it to directly track the price of Bitcoin, potentially making it more attractive to investors and reducing the discount.

The U.S. Securities and Exchange Commission (SEC) is currently reviewing a proposal for a Spot Bitcoin ETF, and their decision could have a significant impact on GBTC. Approval could lead to a further decrease in the GBTC discount, while rejection could potentially increase it.

Other Factors to Consider

There are also other factors that could impact GBTC's price and discount. For example, a lawsuit against GBTC's parent company, Digital Currency Group, could affect its transition into an ETF. Additionally, the bankruptcy reorganization plan for FTX could also have an impact.

In conclusion, while FTX's planned liquidation of its GBTC holdings could potentially impact the fund's price and discount, there are many other factors at play. Investors should keep an eye on the SEC's decision on the Spot Bitcoin ETF and other developments in the crypto market.

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