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Rumor: Fidelity To Make A Big Move Soon

Word on the street is that Fidelity is either going to make a bid for Grayscale, apply for a spot Bitcoin ETF, or both.

Fidelity, the third-largest asset manager in the world, has a storied history in crypto:

  • In 2014, they began mining Bitcoin

  • In 2018, they launched Bitcoin trading for institutional investors and hedge funds

  • In 2020, they released their Canadian spot Bitcoin ETF

  • In 2022, they became the first retirement plan provider to add Bitcoin as a 401(k) plan investment option

  • And in 2023, they added crypto trading into the Fidelity mobile app and launched their crypto exchange, EDX Markets

But all of that is peanuts compared to the “seismic” move they are rumored to be planning.

Word on the street is that Fidelity is either going to make a bid for Grayscale, apply for a spot Bitcoin ETF, or both.

Any and all of the above would be absolutely huge for the industry.

A Bid For Grayscale

Grayscale is the digital asset manager best known for trying and failing to operate a spot Bitcoin ETF. They are also known for providing the most popular way to buy BTC without actually buying it. That’s because their Grayscale Bitcoin Trust (GBTC) allows investors to purchase bitcoin (and other crypto asset’s) through their brokerage account.

The main problem though is that GBTC is futures-based and not spot, meaning that there’s no way for holders to redeem their GBTC shares for actual Bitcoin.

This has resulted in an extremely wide discount between the price of GBTC and the price of Bitcoin. This discount has gotten as high as 48% causing Grayscale to have to buy back shares in order to close it.

Fidelity buying Grayscale would immediately fix this for two reasons:

  1. It’s an extremely bullish move that would drive demand for GBTC, therefore increasing the price of GBTC and lowering the discount to BTC.

  2. Fidelity would most likely also apply for a spot Bitcoin ETF, which if granted, would instantaneously wipe out the discount.

In other words, there’s a reason why share prices of GBTC have spiked ~40% since the news broke.

Not only would this be good for GBTC holders, but it’d be good for the industry as a whole, especially if they turn GBTC into a spot Bitcoin ETF.

That’s why in December of last year we wrote:

Think about it… What this discount means is that you are able to buy BTC at a 47% discount! Sure, you have to pay Grayscale’s management fee, but you can’t beat buying an asset for 47% off. If the discount ever closes due to market forces or GBTC converting to an ETF (which it promises to do), then there is a huge arbitrage opportunity here.”

A Spot ETF

Thankfully, that spot Bitcoin ETF might be coming regardless of whether Fidelity bids for Grayscale or not.

Perhaps they are emboldened by BlackRock filing for their own spot Bitcoin ETF. Maybe they are just true allies of crypto and, by extension, our retirement funds. Whatever the case, a Fidelity spot ETF would be great news for crypto prices, especially if it’s paired with a BlackRock ETF.

However, just like with the BlackRock ETF, we do have to consider the consequences of a crypto ETF owned by BlackRock and Fidelity. Although that’s likely great for prices, it might not be as great for those among us who are in crypto to build an alternative and decentralized financial system.