The U.S. Securities and Exchange Commission (SEC) must review its rejection of Grayscale Investments' attempt to convert its Grayscale Bitcoin Trust (GBTC) into an ETF, a federal appeals court ruled on Tuesday. The legal victory potentially opens the door for a spot bitcoin ETF in the U.S. Advocates have long argued that allowing this type of product would enable a greater swath of the general public to invest in bitcoin without having to go through the trouble of buying it directly or deal with potential issues like their custody providers collapsing. The SEC has disapproved every such ETF application it's reviewed to date, though a new swath of applicants are now hoping for success. Circuit Judge Neomi Rao, writing the D.C. Circuit Court of Appeals' opinion, said that federal agencies are required to "treat like cases alike." The SEC did not explain why it was treating these products differently, she added, making the Grayscale denial "arbitrary and capricious.”

Bitcoin (BTC) gained nearly 8%, topping $28,000 at one point on Tuesday afternoon after a federal appeals court ruled that the SEC must review its rejection of Grayscale Investments' attempt to convert its GBTC into an ETF. As has been typical with such rallies for many months, the crypto quickly gave back a chunk of those gains, with bitcoin trading just under $27,400 at press time, still up more than 5% over the past 24 hours. GBTC also saw its busiest trading session in 14 months, with nearly 20 million shares changing hands through the day, the most since the June 2022 crypto market crash, according to Yahoo data. The share price surged 18% to almost $21, the highest since bitcoin hit $31,000 in mid-July while the fund’s discount to net asset value (NAV) narrowed to as low as 15%, a level not seen since December 2021. Other movers included bitcoin cash (BCH), which has surged 15% over the last 24 hours. Stacks (STX), a bitcoin layer 2 protocol, was also a top gainer following the news, gaining 20% on the day. DCG, the parent company of Grayscale, also owns CoinDesk.

A tentative deal struck between defunct lender Genesis Global Capital (GGC) and parent company Digital Currency Group (DCG) faces opposition from a group of creditors who described in a Tuesday filing the treatment of over a billion dollars in outstanding loans as “wholly insufficient.” Genesis' lending arm GGC filed for bankruptcy in January after a double whammy from the collapse of hedge fund Three Arrows Capital and crypto exchange FTX. The wind-up has been delayed for months by talks over the contribution that DCG should make. An in-principle deal announced by Genesis on Tuesday saw DCG – which is also CoinDesk’s parent company – agreeing to a series of partial repayments to satisfy liabilities of $630 million in unsecured loans due in May 2023 and $1.1 billion due in 2032.

Bitcoin prices surged more than 7% on Tuesday after weeks of slumber as traders reacted to hopes of the long-contended Grayscale Bitcoin spot ETF getting approved in the U.S. following a court decision.

While most market participants are rejoicing, some remain cautious about the optimism, draining out the current euphoria amongst loyalists.

“Grayscale obtained the chance of seeing their filing re-evaluated by the SEC as the causes of rejection did not seem fair to the judge,” said Matteo Greco, research analyst at Fineqia International (CSE:FNQ), in a note to CoinDesk Wednesday. “It doesn't mean that now Grayscale will be 100% able to list a spot Bitcoin ETF, nor that this will happen in the future.”

“Undoubtedly this development is a strong positive signal for the market. However, final decisions on when and if Grayscale will be able to list its product as an ETF are yet to be made,” Greco added, pointing out that some 2.5 million bitcoin are held at a short-term loss that may serve as headwinds in the coming months.

- Omkar Godbole