BlackRock’s recent filing for a bitcoin ETF has sparked a lot of excitement in a market that had been otherwise a very depressing one. Some even say it marks the start of a new ” crypto-summer.

What do you believe will be the biggest benefit from this? asks Avi Felman.

The head of trading digital assets at GoldenTree responds to his own question. “There’s this wonderful instrument, GBTC.”

Felman says that if Grayscale was to be turned into an ETF after BlackRock it would be a great trade’.

He says that the stock is currently being traded at a discount of 33%.

Felman explains to Cumberland’s Global Head Of Trading Jonah Van Bourg, on the 1000X Podcast ( Apple / Spotify ), that GBTC stocks sell at a discounted price compared to their bitcoin underlying assets. This creates some interesting opportunities.

GBTC is sold at a price lower than the BTC because Grayscale is currently structured as a Trust and does not offer asset redemption for its shares. Grayscale aims to be an ETF but it’s currently structured as a Trust. The price of GBTC can deviate from BTC’s value due to supply and demand dynamics.

The shares are currently being traded at a discount but have previously been at a premium. Grayscale is a good option for traders who want to avoid the risk of holding the digital asset themselves. Hardware wallets and twelve-word phrases don’t seem like they would fit the institution vibe.

The Securities and Exchange Commission refused to accept the company’s application for 2022, resulting in a lawsuit which has not been resolved.

GBTC’s recent price surge was a result of news about BlackRock’s ETF and a of subsequent institution filings. Van Bourg warns against relying on the current discount and says that GBTC is likely to sell again ‘at some stage’.

Van Bourg says that Grayscale’s owner, DCG, is the reason for his hesitation. We don’t know whether the managers at DCG are driven more by “reputational” concerns or if their economic rationality is a concern.

Grayscale does not have to compete

Van Bourg says that ‘theoretically’, the textbooks say they should do nothing.

‘Whatever happens to the price of GBTC, it does not change the fees collected by Grayscale. The only thing that changes their fee is the fluctuation of bitcoin’s price.

“They collect 2% every year of the bitcoins held in the fund.”

Van Bourg says that Grayscale does not have to compete against BlackRock, who has filed for an ETF. Van Bourg says that even if GBTC is fire-sold at a discount of minus 90 percent, Grayscale will still be collecting the same fees.

Van Bourg says that if a BlackRock ETF is approved, Grayscale may be better off buying back their own shares at a discount. Grayscale would be able to convert their trust in an ETF after BlackRock clears a regulatory pathway.

He says that it would be unjust to treat your investors in this way, but if you are purely rational from an economic perspective, then that could make sense.

There is a risk of downside.

Felman argues the likelihood of such a move being made is ‘extremely small’ because it would have legal and reputational consequences.

He says that they are trying to build their business rather than generate a lot cash quickly and expose themselves to legal liability.

Felman acknowledges that a number of people have committed worse crimes in the crypto world.

Van Bourg: ‘Let’s imagine you are managing GBTC, and BlackRock releases a product which is infinitely superior.’

Grayscale investors are likely to move into BlackRock. This will leave the company with no choice but allow redemption of GBTC share. ‘GBTC will be redeemed, and assets will get moved into something more institution.