JPMorgan: Spot Bitcoin ETFs Could Put ‘Severe Downward Pressure on Bitcoin Prices’

JPMorgan: Spot Bitcoin ETFs Could Put 'Severe Downward Pressure on Bitcoin Prices'

Global investment bank JPMorgan has cautioned that the approval of spot bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) could “put severe downward pressure on bitcoin prices.” The bank’s analysts estimate that billions of dollars could exit the crypto market after Grayscale Investments converts its bitcoin trust (GBTC) into a spot bitcoin ETF.

Market Impact of Spot Bitcoin ETFs

JPMorgan analyst Nikolaos Panigirtzoglou shared his predictions of the potential impact on the price of bitcoin from the U.S. Securities and Exchange Commission (SEC) approving spot bitcoin exchange-traded funds (ETFs) in a Linkedin post on Friday.

While emphasizing his belief in the imminent approval of spot bitcoin ETFs by the SEC, he cautioned that client discussions are centered on the potential capital outflow from the Grayscale Bitcoin Trust (GBTC) as it transitions into a bitcoin ETF.

“The argument being that a significant amount of GBTC shares has been bought in the secondary market this year at deep discounts to NAV in anticipation of its conversion to ETF and these speculative investors would take profit once GBTC gets converted to an ETF and the discount to NAV gets arbitraged away,” Panigirtzoglou explained. “We estimate that around $2.7bn could come out of GBTC.” The JPMorgan predicted:

In terms of market impact, if this $2.7bn exits completely the bitcoin space then such an outflow would of course put severe downward pressure on bitcoin prices.

“If instead most of this $2.7bn shifts into other bitcoin instruments such as the newly created spot bitcoin ETFs post SEC approval, which is our best guess, then any negative market impact would be more modest. Nevertheless, the balance of risks for bitcoin prices is skewed to the downside in our opinion as some of this $2.7bn is likely to completely exit the bitcoin space,” the analyst continued.

“Significantly more money than the above $2.7bn could exit GBTC if its fee (currently at 200bp) is not lowered sharply post ETF conversion towards our estimated range of the equilibrium fee of around 50-80bp,” he cautioned.

A Shift Towards Regulated Crypto Entities

Panigirtzoglou also shared his analysis of the impact on the crypto industry of the Binance settlement with the U.S. Department of Justice (DOJ), the Treasury, and other federal agencies.

“The Binance settlement is reinforcing an ongoing shift towards regulated crypto entities and instruments which has been the objective of U.S. authorities post FTX collapse,” he said, elaborating:

Such a shift towards regulated crypto entities and instruments should be positive for the crypto ecosystem as more regulation will help attract the interest of traditional market participants and investors.

“Indeed, the participation of big traditional asset managers such as Blackrock and Fidelity in the forthcoming approval of physical or spot bitcoin ETFs by the SEC is consistent with this thesis,” the JPMorgan analyst added.

Do you agree with JPMorgan’s analysis on the price impact of spot bitcoin ETFs? Let us know in the comments section below.



from Bitcoin News https://ift.tt/yuPwvjT

Comments

Post a Comment

Popular posts from this blog

L2 Crypto Project Blast Achieves $660M TVL Amid Mockery for Key Developer Recruitment

Image
Recent data reveals that Blast, the new layer two (L2) blockchain platform, has amassed a significant $660 million in value within its decentralized finance (defi) protocol. Concurrently, while accumulating a variety of crypto assets, the initiative has commenced a search for experienced senior blockchain developers. While Amassing $660M, L2 Blast Project Searches for Developers In recent times, Blast has emerged as a focal point of interest. This project, conceptualized by Pacman , the mind behind the non-fungible token (NFT) marketplace Blur, has rapidly gained traction. Within a span of less than a week, the platform’s total value locked (TVL) soared to approximately $400 million. Concurrently, Blast faced allegations of resembling a Ponzi scheme. During this period, Paradigm, a principal investor in the project, admitted that the team had overstepped in certain aspects of communication and implementation. Pacman has also countered the Ponzi scheme allegations and further cl
Read more

Harsh Laws Make Bitcoin Holders Consider Renunciation or Dual Citizenship

Image
As digital currencies become a mainstay in society, a great number of governments have enforced strict tax guidelines, severe money transmission rules, and tough regulations. Because of a few nation-states’ harsh rules against cryptos, there are individuals who plan to renounce their citizenship in order to become stateless. Some people will also attempt to get double-citizenship, as both of these acts may help sovereign individuals avoid government intrusion and theft. Also Read: As FATF Regulations Galvanize, Crypto Mixing Applications Are Targeted A Cryptocurrency Advocate’s Quest for Financial Sovereignty May Involve Hard Choices It’s been close to 11 years since the inception of Bitcoin and during the last few years government agencies and law enforcement have been cracking down on digital currency holders. In certain areas around the world, a few countries have extremely difficult crypto laws and stringent capital gains taxes. Countries like the U.S. have imposed strict regul
Read more

2021 Bitcoin Price Predictions: Analysts Forecast BTC Values Will Range Between Zero to $600K

Image
As bitcoin has touched new price highs on Thursday nearing the $50k handle, people have been curious as to where the price will go in the future. Meanwhile, despite the gains so far, a number of luminaries, analysts, executives, and proponents from the crypto space believe the leading crypto asset will reach between $60k to six-digits this year. Mike Novogratz Predicts $100K Bitcoin: ‘Other CFOs and CEOs Are Saying, What Should We Be Doing?’ Satoshi Nakamoto’s invention has gained mass appeal in recent times as the leading digital asset bitcoin ( BTC ) has reached its highest value ever in 2021. On Thursday morning (EST), BTC spiked to an all-time high (ATH) at $48,697 per unit. Earlier in the morning at around 2 a.m., bitcoin was exchanging hands for $44,485 and saw an 8.98% increase since then. At the time of publication, at 6:30 p.m. (EST) on February 11, 2021, bitcoin (BTC) is swapping for $47,821 per coin. With BTC so close to the $50k mark, people have been forecasting
Read more