Bitcoin surges after court clears the way for Grayscale to turn its crypto trust into an ETF, handing the SEC a defeat

• Bitcoin soared 6% on Tuesday after Grayscale won its crypto case against the SEC.
• Grayscale sued the SEC in 2022 after the agency rejected its application to turn its bitcoin trust into an ETF.
• The court ruling from the District of Columbia Court of Appeals could pave the way for other bitcoin ETFs.

The wait for a bitcoin ETF could soon be coming to an end after Grayscale Investments won its court case against the Securities and Exchange Commission on Tuesday.

Grayscale sued the SEC in 2022 after the agency rejected its application to turn its over-the-counter traded bitcoin trust into an ETF. The District of Columbia Court of Appeals ruled in favor of Grayscale, handing the SEC a stinging defeat.

Bitcoin soared as much as 6% on Tuesday following the court ruling, ether jumped about 4%, and Coinbase surged about 15%.

The court decision could pave the way for a number of bitcoin ETFs to hit the market, as financial giants like BlackRock and Fidelity have been working on applications with the SEC for their own bitcoin ETFs.

The SEC originally denied Grayscale's bitcoin ETF application because it said the company failed to answer questions and concerns related to potential market manipulation and investor protections. The SEC has used similar reasoning for its denial of a plethora of bitcoin ETF applications over the past few years.

Grayscale may be motivated to convert its GBTC bitcoin trust into an ETF to close the valuation gap between the net asset value of its fund and the underlying value of its bitcoin holdings. The current discount of the Grayscale Bitcoin Trust to its NAV is about 24%, according to data from YCharts.

The Grayscale Bitcoin Trust soared more than 17% on Tuesday. The trust has about $16 billion in assets under management and was launched in 2013.

A statement from Grayscale said the court ruling was "a monumental step forward for American investors, the bitcoin ecosystem, and all those who have been advocating for bitcoin exposure through the added protections of the ETF wrapper."

The company said it is reviewing the details of the court opinion and will be evaluating next steps to get bitcoin ETF approval from the SEC.

If the SEC approves bitcoin ETFs, one Wall Street analyst expects the demand for bitcoin, and subsequently its price, to soar to record highs.