- After a U.S. federal appeals court told the SEC to reevaluate its refusal of Grayscale Bitcoin Trust’s application to become an ETF, trading activity in the Trust’s shares soared to a one-year high.
- Grayscale, a significant player in bitcoin investment, presently manages around $17 billion in bitcoin through its trust. The latest court ruling could mark a turning point in its ongoing tussle with regulators.
- The rush to trade Grayscale’s shares also pumped up the value of bitcoin itself by 7% and considerably tightened the usually wide price gap between Grayscale’s shares and the actual value of the bitcoin it holds.
When the U.S. appeals court told the Securities and Exchange Commission (SEC) to think again about turning down Grayscale Bitcoin Trust’s request to become an exchange-traded fund (ETF), it kicked off a frenzy of trading. Grayscale’s fund, which is in charge of a solid $17 billion worth of bitcoin, saw its share prices leap 18% to nearly $21, their highest point since the bitcoin value stood at $31,000 in the middle of July.
The court’s move has thrown a spotlight on the complex relationship between Grayscale and federal agencies in charge of financial rules. Operated by parent company DCG, which also runs CoinDesk, Grayscale’s bitcoin fund could enter a new phase in its tug of war with the U.S. regulatory system, should the SEC reverse its initial decision.
Yahoo’s financial data shows that about 20 million Grayscale shares changed hands, a record since the market crash of the cryptocurrency world in June 2022. This whirlwind of activity didn’t just stir the waters for Grayscale. Bitcoin itself got a lift, climbing 7% to a more robust value of $28,000.
For folks who keep an eye on these numbers, it’s worth noting that the price difference between Grayscale’s shares and the bitcoin it actually owns shrunk considerably, closing in at just 17%. This price discrepancy has always attracted attention from investors. After the demise of crypto hedge fund Three Arrows Capital, which had tried to play this gap to its advantage, the gap had ballooned to 45%, according to information by CryptoQuant.
Doug Schwenk, CEO of Digital Asset Research, noted that some investors had been buying Grayscale shares in the recent past, betting that a positive court outcome would narrow this gap. Now, these punters are making good money as the gap gets smaller. Schwenk indicated that due to the gap closing, trades could bring nearly a 25% return on top of any gains made from the rising bitcoin market, making the venture highly profitable for those keen on opportunities for quick profits.
All Eyes on Ripple vs SEC
Meanwhile, the legal clash between Ripple Labs and the U.S. Securities and Exchange Commission took a pivotal turn this year. Judge Analisa Torres gave the green light for the SEC to challenge a previous court decision that XRP, Ripple’s digital token, isn’t a security.
Ripple has until September 1 to counter the appeal. This development follows a favorable initial ruling for Ripple, complicated by another case involving the Terra USD token. A jury trial is expected in the second quarter of 2024. Legal experts point to an unclear regulatory stance by the SEC, citing the agency’s previous lack of enforcement action against Ripple.
