The $24 billion Grayscale Bitcoin Trust (ticker GBTC) is currently trading at a roughly 8% discount to its underlying Bitcoin holdings, the narrowest dislocation in over two years, data compiled by Bloomberg show. GBTC entered 2023 with a record discount of nearly 50%.

To many market observers, the quickly narrowing discount reflects building optimism that the US Securities and Exchange Commission is poised to allow physically-backed Bitcoin ETFs to launch after years of denials. A wave of applications from asset-management titans including BlackRock Inc. combined with the SEC’s loss in court against Grayscale over the agency’s decision to block the bid to convert GBTC into an ETF have investors betting that this time is different.

“It’s reasonable to view GBTC’s discount as essentially a live betting line on spot Bitcoin ETF approval,” said Nate Geraci, president of The ETF Store, an advisory firm. “The remaining discount indicates this isn’t a done deal yet, but there’s clearly optimism in the air.”

GBTC has traded at a persistent discount to its holdings since early 2021 given that the trust’s structure doesn’t allow for redemptions, essentially turning the product into a closed-end fund. However, growing conviction that GBTC will be able to convert into a

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