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Following SEC Defeat, Bitcoin ETF Fever Grows as Grayscale’s GBTC Surges

Last Updated July 18, 2023 8:07 AM
Omar Elorfaly
Last Updated July 18, 2023 8:07 AM

Key Takeaways

  • Grayscale’s GBTC skyrockets amidst lawsuit against the SEC
  • Leveraged ETFs are “an even riskier investment product,” says Grayscale

The crypto world has been rocked by two major announcements over the last few days. First, Ripple managed to partially win its case against the US Securities and Exchange Commission (SEC) following Judge Analisa Torres’ decision that XRP should not be considered a security, so long as it was being sold on crypto exchanges rather than directly to investors. 

The second notable headline was regarding the SEC adding BlackRock’s exchange-traded fund (ETF) application to its official docket as part of its proposed rule change process. Should the application get the SEC’s approval, BlackRock will be the first to initiate its spot ETF, opening the door for more applications to be approved in the future.

Digital asset management company Grayscale is in litigation against the SEC as the regulating body refuses to allow Grayscale to convert its Grayscale Bitcoin Trust (GBTC) to a spot ETF.

The news about Ripple helped trigger a surge in GBTC activity.

Grayscale Vs The SEC

Grayscale filed its lawsuit  against the SEC on June 30th. The digital asset manager sued the regulating body for rejecting its request to convert its GBTC to a spot ETF, while approving leveraged ETFs. 

The filing said: “The fact that the Commission has allowed a leveraged bitcoin futures ETP to begin trading demonstrates that the Commission continues to arbitrarily treat spot bitcoin ETPs differently than bitcoin futures ETPs.”

It continued: “While the Commission could theoretically correct its discriminatory treatment of spot bitcoin ETPs by rescinding its approval of all bitcoin-based ETPs, the Commission’s apparent willingness to permit even a leveraged bitcoin futures ETP—a particularly high-risk version of a bitcoin futures product—makes clear that theCommission has no intention of doing so. Thus, the only way to eliminate the Commission’s unequal treatment of bitcoin-based ETPs is to allow proposed spot bitcoin ETPs like Grayscale’s to begin trading.”

James Seyffart, an ETF analyst at Bloomberg Intelligence, even cast his prediction regarding the lawsuit’s timeline.

Grayscale’s Revived Hope

In the meantime, financial institutions, including the world’s biggest asset management firm, BlackRock, have been continuously applying for spot ETFs. BlackRock’s application has finally been added  to the SEC’s official docket for review.

While that doesn’t necessarily mean that BlackRock’s application is about to be accepted, it points towards a positive future for spot ETF applications.

In light of the news, Grayscale’s GBTC daily volumes see a spike that signals its highest level in 2023. 

Statistics  show that Grayscale’s largest fund product topped $183 million on July 13. The company’s second best score was on June 30th, when it topped $170. 

Whether the asset manager will finally have their wish of attaining a spot ETF is yet to be seen. However, the SEC is currently under heavy scrutiny by both legislators and private companies.


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