• Grayscale announced its commitment to convert its Bitcoin trust to a Bitcoin exchange-traded fund when the US regulatory environment allows.
  • With the conversion of GBTC into an ETF, fees will be lowered, allowing institutions to get exposure to the leading cryptocurrency.
  • Since three Bitcoin ETFs were approved in Canada, Grayscale’s fund dominance has been in decline. 

Grayscale recently announced that it would convert its Bitcoin trust to an exchange-traded fund when the regulatory environment in the United States starts to warm up to Bitcoin exchange-traded funds (ETFs).

GBTC conversion could make it the most liquid commodity ETF

The US has not approved any Bitcoin ETFs so far. Having submitted an application for a Bitcoin ETF in 2016, investment giant Grayscale revealed that launching this product was its goal from the start.

After the application, Grayscale was also in discussions with the US Securities & Exchange Commission for most of 2017. The investment company eventually withdrew its application, because it believed “the regulatory environment for digital assets had not advanced to the point where such a product could successfully be brought to market.”

Grayscale explained that each of its trusts has a particular life cycle, and the final stage was for the conversion into an ETF. The first part of its life cycle kicked off with the launch of a private placement, where sales of stock shares or bonds are only available to pre-selected investors and institutions.

The second phase then involves the trusts obtaining a public quotation on secondary markets, allowing exchanges to provide information on their shares. The third stage is to become regulated by the SEC. Currently, Grayscale Bitcoin Trust and Grayscale Ethereum Trust have reached this stage.

ETFs allow institutional investors to get exposure to the asset’s volatility without holding the underlying asset. The firm stated:

Today, we remain committed to converting GBTC into an ETF, although the timing will be driven by the regulatory environment. When GBTC converts to an ETF, shareholders of publicly-traded GBTC shares will not need to take action and the management fee will be reduced accordingly.

With the conversion of GBTC to a Bitcoin ETF, shareholders will no longer have to endure a six-month lockup or a 2% annual management fee. This could bring the trust more in line with the net asset value (NAV) of Bitcoin, according to James Seyffart, an ETF research analyst at Bloomberg Intelligence.

By announcing the ETF conversion, the fund could keep its liquidity — with $38.8 billion assets under management — and make shareholders who are coming to the end of their lockup period happy.

Grayscale CEO Michael Sonnenshein said that if GBTC were converted into a Bitcoin ETF, it would be one of the most liquid commodity ETFs today. 

Grayscale loses dominance

GBTC’s premium was turned into a discount in February when regulated Canadian Bitcoin ETFs emerged, leading to a decline in Grayscale’s dominance, according to Arcane Research.

Three Canadian ETFs have been approved, including Purpose ETF, Evolve ETF and Galaxy ETF — accounting for 2.5% of the market share. On the other hand, the US SEC has turned down all applications for Bitcoin ETFs so far.

According to Seyffart, Grayscale plans to convert all of its products to ETFs eventually, and it is unlikely that the SEC will consider ETFs of other cryptocurrencies before 2022.

However, since institutional demand is rising for exposure to the leading digital currency, it is just a matter of time until Bitcoin ETFs get approved.


Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Recommended content


Recommended Content

Editors’ Picks

Is Altcoin Season here as Bitcoin reaches a new all-time high?

Is Altcoin Season here as Bitcoin reaches a new all-time high?

Bitcoin reaches a new all-time high of $98,384 on Thursday, with altcoins following the suit. Reports highlight that the recent surge in altcoins was fueled by the victory of crypto-friendly candidate Donal Trump in the US presidential election.

More Altcoin News
Shanghai court confirms legal recognition of crypto ownership

Shanghai court confirms legal recognition of crypto ownership

A Shanghai court has confirmed that owning digital assets, including Bitcoin, is legal under Chinese law. Judge Sun Jie of the Shanghai Songjiang People’s Court shared this opinion through the WeChat account of the Shanghai High People’s Court.

More Cryptocurrencies News
BTC hits an all-time high above $97,850, inches away from the $100K mark

BTC hits an all-time high above $97,850, inches away from the $100K mark

Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.

More Bitcoin News
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange

Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange

Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.

More Shiba Inu News
Bitcoin: New high of $100K or correction to $78K?

Bitcoin: New high of $100K or correction to $78K?

Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.

Read full analysis
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

BTC

ETH

XRP