The U.S. Securities and Exchange Commission (SEC) has finally given the green light to the first spot on bitcoin ETFs, a move the crypto industry has long awaited. However, according to JPMorgan, multinational financial services, the market response has been rather subdued, as investors are more concerned about the potential inflows into these new products.
The report, authored by analysts led by Nikolaos Panigirtzoglou, expressed skepticism about the optimistic expectations that the spot bitcoin ETF approval would bring a lot of fresh capital into the crypto space.
We are skeptical of the optimism shared by many market participants at the moment that a lot of fresh capital will enter the crypto space as a result of the spot bitcoin ETF approval, said Nikolaos Panigirtzoglou.
The report estimated that even if no new capital enters the cryptocurrency market, the new spot bitcoin ETFs could still attract inflows of up to $36 billion from other crypto products, such as the Grayscale Bitcoin Trust (GBTC), futures-based ETFs and digital wallets held at crypto exchanges.
The report said that about $3 billion could exit GBTC and migrate to the new spot ETFs, as investors who bought GBTC shares at a discount in the secondary market in the last year would take profit. Moreover, the report warned that Grayscale’s high fees could trigger more outflows unless it lowers its rates to match those of Blackrock and other ETF providers.
Investors May Favor Spot Bitcoin ETFs
The report also suggested that institutional investors who hold their crypto in fund format could switch from futures-based ETFs and GBTC to cheaper spot bitcoin ETFs, especially if GBTC is slow to cut its fees. Futures-based ETFs, approved by the SEC earlier, have higher costs and tracking errors than spot ETFs, which directly hold bitcoin.
The report concluded that the spot bitcoin ETF approval could positively impact the bitcoin price in the medium term, as it would improve the liquidity and efficiency of the market. However, it also cautioned that the approval could increase the regulatory scrutiny and volatility of the crypto space in the short term.
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