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Contrary to expectations of a massive influx of fresh capital, JPMorgan analysts suggest that spot Bitcoin (BTC) ETFs may experience up to $36 billion in inflows redirected from existing cryptocurrency instruments.
According to a note by JPMorgan analysts, the breakdown of this anticipated capital movement includes $3 billion from Bitcoin futures-based ETFs, $3-$13 billion from Grayscale Bitcoin Trust (GBTC), and a substantial $15-$20 billion from retail investors transitioning from digital wallets on cryptocurrency exchanges and retail brokers to spot Bitcoin ETFs.
However, the analysts, led by Nikolaos Panigirtzoglou, did not specify the timeframe for these projected inflows.
JPMorgan analysts expressed skepticism regarding the widespread optimism among market participants regarding the approval of spot Bitcoin ETFs potentially leading to a significant injection of fresh capital into the cryptocurrency space.
They proposed an alternative perspective, suggesting that the amount of new capital entering the crypto sector will be influenced more by regulatory developments and, specifically, the extent to which regulators allow the crypto ecosystem to integrate into the traditional financial system over time.
SEC Approves Spot Bitcoin ETFs
In a historic move, the U.S. Securities and Exchange Commission (SEC) granted approval to 11 spot Bitcoin ETFs, marking a significant departure from more than a decade of regulatory opposition.
The decision has opened the door for major traditional financial giants such as BlackRock, Invesco, and Fidelity to provide direct access to funds that invest in Bitcoin.
On their debut trading day, spot Bitcoin ETFs have already witnessed a remarkable $4 billion in trading volume, as per data from Yahoo Finance.
JPMorgan analysts predict that the success of these newly created ETFs will hinge on fees and liquidity.
Given the high 1.5% fees associated with GBTC, they expect significant outflows from this Bitcoin trust.
Furthermore, speculative investors who purchased discounted GBTC shares in the secondary market over the past year, anticipating the elimination of the discount to Net Asset Value (NAV) upon conversion, are likely to take profits.
This could lead to approximately $3 billion exiting GBTC and flowing into the newly launched ETFs.
JPMorgan Anticipates Outflows if GBTC Does Not Reduce Fees
The analysts anticipate even larger outflows of $5-$10 billion if GBTC fails to reduce its fees to the 0.25% level set by issuers like BlackRock.
Additionally, if GBTC loses its status as the world’s largest Bitcoin fund over time, the liquidity advantage it currently enjoys due to its size may diminish, potentially causing further outflows.
In conclusion, JPMorgan analysts suggest that retail investors are more likely to favor spot Bitcoin ETFs.
On the other hand, institutional investors holding their cryptocurrency in fund format may pivot away from futures-based ETFs and GBTC in favor of the newly created, more cost-effective spot Bitcoin ETFs.
Meanwhile, renowned crypto enthusiast Mike Novogratz, who is CEO of Galaxy Digital, has forecasted a fierce struggle for dominance between Invesco, BlackRock, and Fidelity.
Speaking with CNBC, Novogratz emphasized that the cryptocurrency ETF landscape is not one-size-fits-all.
He explained that winning the war in this emerging market hinges on factors such as execution, liquidity, and hidden fees, rather than merely reducing expense ratios.
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