JPMorgan, a top American bank, released a study about how the greenlighting of on-the-spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) might impact BTC prices. The report, written by strategist Nikolaos Panigirtzoglou, was posted on Linkedin on Friday.
GBTC Outflows Could Pressure Bitcoin Prices
Panigirtzoglou stated his belief in the imminent approval of spot bitcoin ETF applications by the SEC. He highlighted the possibility of investors divesting their shares in the Grayscale Bitcoin Trust (GBTC) in anticipation of its transition to a bitcoin ETF.
Currently, GBTC trades at a discount to its net asset value (NAV), indicating that its share price is lower than the value of the BTC it holds. This situation has led some investors to purchase GBTC shares at a discount, anticipating profits when the discount vanishes upon GBTC becoming an ETF. Panigirtzoglou approximates that about $2.7 billion may exit GBTC due to this strategy.
He cautioned that the departure of this capital from the bitcoin sphere might significantly push BTC prices downward. Additionally, shifting most of this capital into other bitcoin vehicles, like the recently established spot bitcoin ETFs, would still incline the risks for BTC prices negatively.
Financial expert Panigirtzoglou emphasized the need for GBTC to reduce its fee post-conversion to an ETF, currently at 2%. He mentioned the ideal fee for a bitcoin ETF is 0.5% to 0.8%, warning of potentially significant outflows from GBTC, exceeding $2.7 billion, if its fee isn’t adjusted accordingly.
He observed that the fee for GBTC is a significant cause of its lesser value compared to NAV. This is because investors need a lower price to balance out the increased expense of owning GBTC, unlike other BTC offerings.
Binance Settlement Is Positive for Crypto Ecosystem
Panigirtzoglou remarked on the settlement between Binance, the world’s largest cryptocurrency exchange, and U.S. authorities. This agreement entails Binance paying $200 million and undertaking compliance steps to address accusations of illegal operations in the U.S.
The Binance settlement signifies a shift towards regulated crypto entities, aligning with the U.S. authorities’ objectives post the FTX collapse. This move is deemed positive for the crypto ecosystem, aiming to attract traditional market participants and investors.
The surge in traditional asset managers like Blackrock and Fidelity seeking approval for spot bitcoin ETFs from the SEC indicates the growing market confidence. Their consistent success in attaining ETF approvals instills further assurance in the potential realization of ETFs in the U.S.
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