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Grayscale Hints at Plans to Convert Bitcoin Trust into BTC-settled ETF

Grayscale, an institutional investment firm, recently announced its plans to convert its Bitcoin trust into a settled exchange-traded fund (ETF). The decision was made known by Barry Silbert, CEO of Grayscale’s parent company, Digital Currency Group. Silbert hinted that the investment giant is planning to convert its Bitcoin trust into a spot-settled Bitcoin fund.

Following the approval of a Bitcoin futures ETF by the U.S. Securities and Exchange Commission (SEC) in a Twitter chat, Bitcoin commentator Preston Pysh quizzed Grayscale’s CEO when Grayscale’s Bitcoin Trust would be converted into a BTC-settled ETF, and his response was, “stay tuned.” 

However, Silbert’s comments appear to have alarmed Grayscale Bitcoin Trust investors, with some Twitter users “questioning what a reorganization would mean for investors holding shares in Grayscale’s Bitcoin Trust

Some users tweeted, “What happens to us Grayscale investors once the spot ETF is approved? Is our investment converted into ETF shares?”

A Recent Report Revealed Grayscale’s Plans

report citing anonymous insiders claimed that Grayscale was waiting for the Securities and Exchange Commission to finally approve a Bitcoin ETF, and afterward, rumors of Grayscale’s purported ambitions for a Bitcoin ETF began circulating late last week

The Grayscale application will be reviewed for 75 days, according to the source, who did not want to be identified because the New York-based business had not revealed its plans at the time

Grayscale’s ETF would be another step toward legitimizing the emerging crypto asset class. Even after setbacks like being banned by China last month, Bitcoin has proven robust, touching all-time highs of over $60,000.

The Securities and Exchange Commission (SEC) stated on Oct. 15 that it had accepted the registration of securities from ProShares Trust’s Bitcoin (BTC) exchange-traded fund, which is based on futures. ProShares’ ETF gives investors exposure to cash-settled contracts that speculate on the future price of BTC.

Criticism by Experts

Even though the ETF’s approval was identified as the key impetus for Bitcoin’s recent strong market activity, several analysts have criticized the fund for its cash-settled structure, urging the SEC to approve a Bitcoin ETF that is backed by and settled in BTC instead.

Grayscale a Big Player in Bitcoin 

Grayscale has $52.6 billion in assets under management (AUM), with 73 percent of it in the Bitcoin Trust, according to the firm’s most recent holdings update on Oct. 15. Grayscale’s Bitcoin stockpile is estimated to be around 620,000 BTC, or 3.3 percent of Bitcoin’s total supply, according to the statistics.

The company, which was a pioneer in crypto investing and allowed institutional investors like Cathie Wood of Ark Invest to gamble on bitcoin, first filed for an ETF in January 2017. In October of that year, it withdrew the application after the SEC stated that it had doubts and questions about the Bitcoin community, which it has to clear before granting Grayscale’s request.

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