Federal Judge’s Ruling Boosts Odds of US Spot Bitcoin ETF Approval, Adds Optimism to Grayscale’s Bitcoin and Ethereum Trusts
The recent decision by a federal judge to undermine the U.S. Securities and Exchange Commission’s rejection of converting the Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF) has sparked optimism among analysts. Many now believe that the approval of a spot bitcoin ETF is just a matter of time, with Bloomberg analysts putting the odds of approval this year at 75%.
This optimism is not only reflected in market prices for Grayscale’s bitcoin product but extends to other cryptocurrencies as well. The discounts at which the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE) were trading in comparison to their net asset values (NAV) have significantly narrowed. GBTC went from trading at a 46% discount to only 21%, while ETHE went from 59% to 29%.
With the expectation that a bitcoin ETF will eventually gain approval, investing in GBTC and waiting for final approval seems like a logical move for bullish investors. The theory is that the discount will disappear, and the underlying asset (bitcoin) might experience an increase in value, creating a win/win situation. However, there may be an even bigger opportunity in Grayscale’s Ethereum Trust.
If a U.S. spot bitcoin ETF is approved, there should be little argument against approving a spot ether ETF as well. Grayscale has already expressed its plans to convert ETHE and other products into ETFs. While it may not be possible for smaller crypto assets like SOL or ATOM to follow suit, the success of ethereum ETFs is evident. Ethereum ETFs were launched soon after the first bitcoin ETF in Canada, as regulators were comfortable due to the presence of a regulated futures market for ETH.
The discount on ETHE is greater than that of GBTC, presenting a significant arbitrage opportunity. Additionally, the ETH market is less liquid than the BTC market, meaning that the incremental buying from an ETF could have a more substantial impact on price. Furthermore, as the leading platform for Web3 development, ETH has better upside potential.
Futures ETFs have historically underperformed spot markets, making spot ETFs a safer and more sensible solution for investors. With the expectation of approval, many believe that spot ETFs will offer attractive opportunities. However, investors should not overlook the potential of ETH and ETHE, as they may present a larger opportunity.
In conclusion, while the optimism surrounding the eventual approval of a bitcoin ETF has sparked enthusiasm in the market, it is worth considering the potential of Grayscale’s Ethereum Trust. If a bitcoin ETF is approved, it is likely that an ether ETF will follow suit. The greater discount and potential impact on the ETH market make ETHE an enticing investment option. Despite the expectation of spot ETF approvals, investors should keep an eye on ETH and ETHE for potential gains.
