The entire crypto community went into celebratory mode over Grayscale’s recent victory over the SEC. However, some experts have expressed their concerns. Among them is the golden beetle Peter Schiff. Schiff is skeptical of Grayscale’s victory and predicts it will be negative for Bitcoin.
Peter Schiff: This development actually means a drop for Bitcoin!
As you follow on Kriptokoin.com, there was a festive mood in the crypto market today. Behind this positive sentiment is Grayscale’s victory over the SEC. However, some experts suggest that it won’t last long. Peter Schiff, a name that needs no introduction in the financial industry, is one of these experts. On social media platform X, Schiff expressed his concerns about the possible consequences of the Grayscale Bitcoin Trust (GBTC) transition to a spot Exchange Traded Fund (ETF). According to Schiff, this development is likely to cast a shadow over Bitcoin’s market dynamics. In this context, Schiff shared the following:
The fact that GBTC becomes a spot ETF actually means a drop for Bitcoin. Investors can now buy GBTC and sell or short BTC. Once GBTC becomes an ETF, the discount to NAV disappears. Shareholders can then amortize and drastically increase the tradable supply by forcing GBTC to sell BTC on the market.
$GBTC becoming a spot ETF is actually bearish for #Bitcoin. Traders can buy GBTC now and sell or short #BTC. Once GBTC becomes an ETF, the discount to NAV goes away. Shareholders could then redeem, forcing GBTC to sell BTC into the market, vastly increasing the tradable supply.
— Peter Schiff (@PeterSchiff) August 29, 2023
The journey is not over yet for the Spot Bitcoin ETF
Grayscale, a dominant player in the crypto industry, has been temporarily halted after the US Securities and Exchange Commission (SEC) placed a red flag on the GBTC over-the-counter application. What was the SEC’s primary concern? The product did not appear to be equipped to combat “fraudulent and manipulative acts and practices”. Not backing down, Grayscale took the battle to court, appealing the SEC’s rejection on the spot Bitcoin ETF.
On August 29, there was a significant change in the narrative. US Court of Appeals Judge Neomi Rao upheld Grayscale’s request for review. Thus, he reversed the situation by invalidating the SEC’s earlier rejection of the GBTC application. Interestingly, this is not the first time that Judge Rao has been skeptical of the SEC’s stance. Earlier, he noted the commission’s lack of clarity on where Grayscale faltered. But the journey isn’t over yet. This is undoubtedly a victory for Grayscale. That said, it doesn’t rubber-stamp the final list of a Grayscale spot Bitcoin ETF.
US Court of Appeals paves the way for spot BTC ETFs
Earlier this year, Grayscale filed a lawsuit against the SEC for rejecting a request to convert the Grayscale Bitcoin Trust (GBTC) into a Bitcoin exchange-traded fund (ETF). Today, the U.S. Court of Appeals ruled in Grayscale’s favor, invalidating the SEC’s reasoning for rejection. The SEC argued that it does not have enough data to determine whether fraud and manipulation in the Bitcoin spot market will affect the BTC futures markets. However, in this case, the court ruled that the futures price of BTC is highly correlated with the spot price and therefore the fraud in the spot market will be reflected in the futures market.
This decision sets a precedent that will pave the way for other spot Bitcoin ETF filings with the SEC. Therefore, it is of great importance for the entire industry. Leading asset managers such as BlackRock and Citadel have also sought approval for spot Bitcoin ETFs. But so far, none of them have received the green light. This decision puts significant pressure on the SEC to consider approving a spot Bitcoin ETF.
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