Bitcoin ETF Race Intensifies: Grayscale’s Latest Filing After Leadership Change

• Grayscale Investments has filed what might be its last Bitcoin ETF amendment.
• The firm has finally succumbed to the SEC’s Cash Creates redemption model.

The race for the approval of a Bitcoin Exchange-Traded Fund (ETF) has taken a dramatic turn as Grayscale Investments, a leading digital asset manager, filed another amended S-3 form with the Securities and Exchange Commission (SEC). 

Grayscale’s Bitcoin ETF Update

The recent filing signals Grayscale’s compliance with the SEC’s preference for cash-only orders, as noted by Bloomberg’s analyst James Seyffart. The filing highlights, “Although the Trust creates Baskets only upon receipt of Bitcoins, and redeems Baskets only by distributing Bitcoins, at this time an Authorized Participant can only submit Cash Orders…The Trust is currently able to accept Cash Orders.”

UPDATE: @Grayscale just filed another amended S-3 to convert $GBTC into a #Bitcoin ETF. pic.twitter.com/TKPP9ufa9X

— James Seyffart (@JSeyff) December 26, 2023

Notably, Grayscale has been proactive in updating its Bitcoin ETF filing, making two changes in November. The first change pertains to the fee structure, transitioning from a monthly to a daily fee format. The second modification simplifies the process of creating and redeeming shares by altering how assets are combined in an omnibus account. 

Grayscale’s amended S-3 filing with the SEC aims to convert the Grayscale Bitcoin Trust (GBTC) fund into a spot Bitcoin ETF. This move aligns with the company’s strategic adjustments, including modifications to fee structures and asset management processes. These updates indicate Grayscale’s preparedness for increased competition in the ETF market, positioning itself against major players like BlackRock.

Markedly, BlackRock recently allocated $10 million to a Bitcoin ETF fund, showcasing confidence in cryptocurrencies as legitimate financial assets. Similarly, Bitwise Asset Management has also entered the spot Bitcoin ETF market, revealing a change in strategy from futures-based products to direct exposure to Bitcoin performance.

Grayscale’s recent filing comes on the heels of Barry Silbert stepping down as Chairman, following a reshuffling of the company’s board. Silbert’s resignation is part of a series of developments triggered by a civil lawsuit filed by the New York Attorney General, Letitia James, against him. The lawsuit alleges that Silbert failed to inform investors about the financial health of Genesis Global Capital and concealed substantial losses incurred by the firm.

Mark Shifke, the Chief Financial Officer (CFO) of Digital Currency Group (DCG), has been appointed as the new Chairman of Grayscale Investments. The reshuffling, effective from January 1, 2024, coincides with the approaching month for a potential spot Bitcoin ETF approval.

ETF Disruption and Market Dynamics

Bloomberg’s senior analyst, Eric Balchunas, emphasizes the disruptive nature of ETFs, offering low-cost investment options. 

He counters claims that Bitcoin could disappear with ETF approval, likening it to fear-mongering similar to what was witnessed with high-fee active managers and hedge funds. Balchunas highlights the potential challenge cost-effective ETFs pose to the current profitable model of many crypto exchanges.

Amidst these developments, JPMorgan presents bold predictions about potential changes in the Bitcoin market. 

The bank suggests there may be an outflow of funds amounting to $2.7 billion if Grayscale’s conversion of GBTC to an ETF materializes. While institutional investors express optimism about the potential approval of a spot Bitcoin ETF, JPMorgan warns of market destabilization and increased volatility.

According to current data, Bitcoin is trading at $42,445, down 0.83% with market capitalization pegged at $831.2 billion and a 24-hour trading volume of $27.5 billion.