The gap between the price of the $23 billion Grayscale Bitcoin Trust (GBTC) and its net asset value narrowed to 11% this week as spot bitcoin ETF hopes reached fever pitch. But GBTC isn’t the only quasi-closed-end cryptocurrency fund seeing its discount drop.
Today, the competing Osprey Bitcoin Trust (OBTC), which has $100 million in assets under management, is only trading 7% below its net asset value, the smallest discount in over a year.
The difference between the price of the $6.1 billion Grayscale Ethereum Trust (ETHE) and its NAV is now 16%, down from 60% in December, while the gap between the price of the $227 million Grayscale Ethereum Classic Trust (ETCG) and its NAV is now 44%, down from 77% in December.
Meanwhile, the $106 million Grayscale Litecoin Trust (LTCN) and the $70 million Grayscale Bitcoin Cash Trust (BCHG) are trading with premiums of 5% and 2%, respectively, after sporting discounts of around 60% at the start of the year.
The fast-disappearing discounts on these trusts are a reflection of investors’ expectations that the launch of a spot bitcoin ETF is imminent.
A successful ETF conversion would open GBTC up to fund redemptions, instantly bringing its market price in line with its net asset value.
What Comes After a Spot Bitcoin ETF Approval?
But a potential greenlight for spot bitcoin ETFs would only have a direct impact on GBTC. The ability to arbitrage away the discounts on the other trusts would still be lacking.
Of course, investors probably believe that a spot bitcoin ETF would be followed by spot ETFs tied to other cryptocurrencies.
One can certainly make the case that a spot ether ETF won’t be far behind a spot bitcoin ETF. Ether futures trade on the CME and the SEC recently cleared the way for ETFs tied to those futures contracts. A spot ether ETF isn’t much of a stretch.
What is more of a stretch are ETFs tied to other cryptocurrencies, such as litecoin and bitcoin cash. There are no futures contracts on the CME tied to those cryptocurrencies, so the SEC will likely make the case that these should be treated differently than bitcoin and ether.
It’s hard to imagine a litecoin, bitcoin cash or dogecoin ETF launching anytime soon.
And that’s what makes the price action in LTCN and BCHG ironic. They’ve been acting even better than GBTC and ETHE, even though a conversion of those trusts into ETFs is still farfetched.
