Grayscale wins court case, GBTC trading volume surges 17%

Grayscale scored a major victory in court against the U.S. Securities and Exchange Commission today, ushering in a brighter day for its crypto products.

The Washington Circuit Court of Appeals has granted Grayscale’s petition for a review of the SEC’s rejection of its application to convert GBTC into a spot Bitcoin ETF. As expected, the decision of the three-judge panel rekindled hopes for the approval of a spot Bitcoin ETF.

Grayscale’s Bitcoin Trust (GBTC) rose nearly 17% to $20.56 in secondary trading today. For each share of Grayscale’s holding, the company’s stock price rose 7.18% to $25.09. As a result, assets increased to $17.4 billion from $16.2 billion the day before.

GBTC’s trading volume recorded its largest daily volume in terms of value since June 21, 2022.

Today’s news also brings renewed attention to efforts by major asset managers like BlackRock and Fidelity to launch their own spot Bitcoin ETFs.

Traders and other market participants were bullish on the filings Tuesday, given Grayscale’s preliminary results. They are also trying to analyze what the ETF approval would mean for bitcoin liquidity and institutional and retail investors.

Paul Cappelli, head of liquid passive strategies at Galaxy Digital, said the court’s decision was “a watershed moment for the space, where ETFs are a fundamental product,” adding that ETFs have boosted trading in commodities, including gold and oil, because “investors want access.”

As of the close in New York on Tuesday, Bitcoin (BTC) was up about 7% on the day, ending an intraday short-term rally.

Assets continue to increase

GBTC is expected to continue to reduce the trust’s discount to its net asset value (NAV) through Tuesday’s close.

On Monday, the Bitcoin Trust was trading at $17.58 per share on the secondary market, when Grayscale valued it at $23.41 per share.

Grayscale first sued the SEC in June 2022 after the U.S. regulator blocked the company from converting GBTC into an ETF, with the instrument trading at a significant discount to its net asset value.

Hashflow’s general counsel, Rahsan Boykin, noted that this was “an interesting ruling,” given “the way the judge broke down the SEC’s arguments… It was a pretty harsh stance in my opinion.”

Grayscale launched an ETF to enable redemptions of GBTC shares, and once redemptions began, ETF arbitrageurs would restore the product to its net asset value.

“Since our founding in 2013, Grayscale has adhered to U.S. financial rules and regulations in building our product suite, based on a fundamental belief: investors should have transparent, regulated access to cryptocurrency,” CEO Michael Sonnenshein said in a statement.

Cappelli said that if Grayscale is ultimately successful, the broader Bitcoin and cryptocurrency markets should react positively, saying the event is “certainly not priced in.”

Cappelli said the market could “see some volatility,” adding that this “does indicate that we think demand for bitcoin is going to go up .”

“One thing everyone should remember is that this is just another step in the process,” he noted. “While this is a big step forward and provides clarity, it will still take some time before there is a physical ETF in the market.”