**Bitcoin Trust Discount Narrows as Optimism Builds for Spot ETF Approval**
In a surprising turn of events, traders who previously bet against US regulators approving a Bitcoin exchange-traded fund (ETF) are now scrambling to cover their positions as optimism for approval grows.
### The Vanishing Discount
The Grayscale Bitcoin Trust (GBTC), a $24 billion cryptocurrency fund, is currently trading at an 8% discount to its underlying Bitcoin holdings. This is a significant improvement from the 50% discount it faced at the start of 2023. The quick narrowing of the discount is seen as a reflection of growing confidence that the US Securities and Exchange Commission (SEC) will greenlight physically-backed Bitcoin ETFs. Many industry experts interpret the dwindling discount as indicative of a live betting line on spot Bitcoin ETF approval.
### Persistent Discounts
Throughout 2021, GBTC consistently traded at a discount to its holdings due to its structure which doesn’t facilitate redemptions. This turned the fund into a closed-end fund. However, the increased certainty that GBTC might transition into a spot Bitcoin ETF has caused the fund’s value to skyrocket by nearly 277% in 2023. Meanwhile, Bitcoin’s value has only increased by 128% during the same period.
### Influx of Capital and Speculations
The prospect of GBTC converting into an ETF upon SEC approval has attracted billions of dollars into the Grayscale trust this year. However, analysts at JPMorgan Chase & Co. predict that these funds might quickly exit the trust once the conversion takes place, anticipating a $2.7 billion outflow.
### Potential Consequences
Additionally, JPMorgan suggests that if Grayscale doesn’t lower its fee post-conversion, the outflows could rise considerably. GBTC charges a 2% annual fee, while other competitors have listed a 0.8% fee on their spot Bitcoin ETF application. Grayscale, on the other hand, believes that the trust’s assets under management will grow after receiving approvals to trade as an ETF.
### Conclusion
Despite the rapid convergence of the discount, industry analysts believe that GBTC is unlikely to return to trading at a premium until ETF approval is confirmed. Bloomberg Intelligence ETF analyst James Seyffart predicts a 90% probability of SEC Bitcoin ETF approval by January 10th, although nothing is guaranteed just yet.
The once massive discount on the Grayscale Bitcoin Trust seems to be quickly disappearing as more and more traders place their bets on the imminent approval of a US spot Bitcoin ETF. If this optimistic sentiment holds, the crypto fund’s discount may continue to evaporate, potentially signaling a new era for digital currency trading.
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