May. 19, 2022
To Whom it May Concern: I'm writing to express my support for converting the Grayscale Bitcoin Trust (GBTC) to an ETF. Investors would be better served by having access to a US spot-based bitcoin ETF than they would be if Grayscale's application is rejected. Currently, GBTC trades at greater than a 30% discount to its net asset value. That represents a massive market inefficiency that costs investors. It adds a counterproductive layer of volatility to an already-volatile asset. Futures-based ETFs are sufficient for many investors but the average investor doesn't understand the roll cost associated with futures curves that are in contango. Most are seeking a simple financial product that provides the exposure they desire: in this case, exposure to the spot price of bitcoin. When investors feel that regulated financial products don't sufficiently deliver what they're seeking, they sometimes wander into less regulated and less reputable areas. As the recent blowup of the TerraLuna stablecoin system demonstrates, a low interest rate environment encouraged reaching for yield in an unregulated asset that was built on an unstable foundation. Tens of billions of dollars in value evaporated in a few days. By contrast, bitcoin's protocol offers no inherent yield or unsustainable promises of price stability. It's simply an asset that some people desire based on its unique characteristics. Its price volatility is well-known, and in its full history it has not succumbed to a fatal positive feedback loop crash like UST and LUNA did, partly thanks to its predictable supply and resilient protocol design. If investors are seeking exposure to crypto assets, they should be encouraged to own the more reliable and battle-tested protocols, rather than betting the farm on a new project that evades scrutiny until the day it collapses to zero. Investors who want bitcoin exposure can get it any number of places. Bitcoin can be purchased directly from an exchange such as Coinbase. Fidelity is now offering bitcoin exposure in 401Ks. But most retirement accounts do not provide the ability to purchase bitcoin, and younger investors in particular, are often inclined to liquidate their retirement accounts and suffer the penalties and taxes in order to access bitcoin. Offering access to a spot bitcoin ETF would help ensure that younger investors maintain the advantages of a retirement account while also achieving the asset exposure they desire. It also ensures their bitcoin exposure is custodied by a reliable institution such as Coinbase, instead of losing their retirement savings to a phishing attack or scam. Bitcoin's price is currently in a downtrend, so the time is right to approve a spot-based bitcoin ETF. The impact on price and volatility would be less extreme now than if the ETF is approved during a bitcoin bull market. Since GBTC is trading at such a large discount, allowing creations and redemptions could actually lead to a net decrease in assets within GBTC as the discount is closed via arbitrage. This could provide a stabilizing force to the likely media hype an ETF approval would bring. If the SEC waits until bitcoin is in a bull market to approve the ETF conversion, the market distortions and potential mania could be quite disruptive. Thank you for your consideration. Please let me know if I can clarify any points or answer any questions. Regards, Jordan Mathews