Bitcoin Eyes Crucial Period As Court To Rule On Grayscale Vs. SEC
The bankruptcy issue that affected Genesis and the accompanied uncertainty over the fate of Digital Currency (DCG) and Grayscale has had little effect on the broader crypto market in the past few days. However, investors are starting to analyze the outcome of the Genesis bankruptcy claim, which the embattled company announced last week on the Bitcoin and wider crypto market.
Anticipating A Favorable Result
Meanwhile, investors are also considering what could happen with BTC’s price when the reserves of Grayscale’s Bitcoin Trust (GBTC), having more than 630,000 BTC, are liquidated. Meanwhile, the most critical event right now is Grayscale’s lawsuit against the United States Securities and Exchange Commission (SEC).
The regulator has remained reluctant to approve the conversion of GBTC to Bitcoin spot ETF. However, following the Genesis insolvency case, the Court of Appeals has rescheduled the date for the oral debate between Grayscale and the securities regulator.
Per a court directive earlier this week, the new hearing date is March 7, 2023. Craig Salm, the chief legal counsel at Grayscale, had previously stated that the date for the oral discussions would remain unchanged until the Q2 of this year.
Thus, the hearing comes close to nine months after Grayscale began its legal tussle with the SEC. Meanwhile, the SEC denial of Grayscale’s request to convert its GBTC into a Bitcoin spot exchange-traded fund (ETF) based on concerns about market manipulation and investors’ exposure to risk.
Impact On Bitcoin
After Genesis announced its bankruptcy filings, the crypto community wondered what the move would mean to DCG and Grayscale. Even though the industry isn’t certain that the crypto lender would drag its parent company and Grayscale down, experts believe that the issue is more complicated than it appears.
Another problem for DCG and Grayscale is the loss of confidence in GBTC, with its discount to net asset value currently at roughly 41%. Observers believe that the company would regain its investors’ confidence by converting the Bitcoin-based trust into an ETF.
Thus, eliminating any proposed discount for the asset. However, this is a race against time, as DCG was reported to have halted its quarterly dividend payouts to cut operation costs and boost its balance sheet.
Another area that DCG is exploring is the sale of its crypto news platform, CoinDesk, to raise much-needed funds. In addition, on-chain data shows that the firm owns almost one-tenth of the total FBTC (Fidelity Advantage BTC ETF) shares.
However, due to securities regulations, the company can’t sell more than 1% of its GBTC shares in a single quarter. If DCG does, it would further disrupt its trust attraction to investors and broaden the price discount.
In this case, the ongoing lawsuit against the regulator may pave the way for the approval of the first Bitcoin spot ETF in the United States.
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