Grayscale Investments' battle against the U.S. Securities and Exchange Commission (SEC) has taken a surprising turn, causing the persistent Grayscale Bitcoin Trust (GBTC) discount to collapse in value.
The discount collapsed due to the oral arguments presented in federal court on Tuesday that allowed the plaintiff to turn the tables in the legal fight.
Seyffart also adds that even if Grayscale wins the case, there is still a big "if" on how the judges handle it, as the SEC could potentially deny it again for different reasons.
"That said, based on what I just listened to, I wouldn't be surprised if Grayscale won over all three of the judges here. Maybe my view will change as I digest it more but that's my initial read," he tweeted.
During the hearing, the judges appeared to side with Grayscale, with one of them questioning the gap between the value of GBTC shares and underlying Bitcoin, and whether an ETF would close it.Additionally, another judge was skeptical about the SEC's decision to approve futures ETF but not a spot one, stating that the SEC had not provided enough information to justify its decision. The judges also hammered the SEC on its decision to approve a Bitcoin futures market but not a spot one, arguing that if there is manipulation in the futures market, it will show up in the spot market.
Despite the positive outcome for Grayscale, there is still uncertainty surrounding the case's final ruling. According to analyst Elliott Stein, the victory odds for Grayscale have gone up to 70%, but the language used in the ruling will be key.
Seyffart cautions that the oral arguments and lines of questioning are not a definite indicator of how the case will go. Overall, it remains unclear how the judges will ultimately rule.
Grayscale sued the SEC last year after the agency denied its bid to convert the GBTC trust into a spot ETF. Grayscale described the rejection as "capricious" and "discriminatory."
Valeria Blokhina
Vladislav Sopov
