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JPMorgan Expects $36B of Inflows in Bitcoin ETF via Rotational Capital

In the US, the debut of spot bitcoin exchange-traded funds (ETFs) is not likely to attract a significant influx of new capital. According to JPMorgan analysts, there might be a shift of up to $36 billion in inflows into ETFs from existing crypto instruments.

This breakdown includes an estimated $3 billion from bitcoin futures-based ETFs, and $3-$13 billion from Grayscale Bitcoin Trust. It also expects $15-$20 billion from retail investors transitioning from digital wallets at crypto exchanges/retail brokers to spot bitcoin ETFs.

The analysts, led by Nikolaos Panigirtzoglou, expressed skepticism about the widespread optimism regarding the approval of spot bitcoin ETFs leading to a substantial increase in fresh capital within the crypto space. Besides, the banking giant noted:

“We instead believe that the amount of fresh capital entering the crypto space will likely be more of a function of regulations and in particular a function of how much room regulators will allow for the crypto ecosystem to encroach into the traditional financial system over time.”

The US Securities and Exchange Commission (SEC) made history by granting approval to 11 spot bitcoin ETFs, marking a significant shift after more than a decade of resistance. On the inaugural trading day, spot bitcoin ETFs have swiftly surpassed $4 billion in trading volume, as reported by Yahoo Finance data.

Speaking about the newly approved ETFs, the JPMorgan analysts said:

“We believe fees and liquidity are likely to play a key role in terms of how much money will enter the newly created ETFs.”

JPMorgan: GBTC Can See the Maximum Outflows after ETF Introduction

In the latest analysis, industry experts emphasize the anticipation of substantial outflows from the Grayscale Bitcoin Trust (GBTC), primarily attributed to its comparatively high 1.5% fees in contrast to newly introduced spot bitcoin ETFs. The analysts predict that speculative investors, who had previously acquired GBTC shares at a discount in the secondary market, might capitalize on profits amid expectations of the discount narrowing upon conversion to Bitcoin ETF.

The forecast suggests an approximate $3 billion exodus from GBTC, with investors reallocating funds to the recently launched ETFs, driven by profit-taking motives. Moreover, there is a potential for an additional $5-$10 billion in outflows if GBTC fails to adjust its fees to the 0.25% benchmark set by major issuers such as BlackRock.

“If over time GBTC loses its crown as the biggest bitcoin fund in the world, then the liquidity advantage that it currently enjoys due to its size would also be lost, thus inducing even more outflows,” the analysts stated.

In summary, the analysts suggest that retail investors have a preference for spot bitcoin ETFs, whereas institutional investors currently holding crypto in fund structures might transition away from futures-based ETFs and the Grayscale Bitcoin Trust (GBTC). This shift is expected to be particularly pronounced if GBTC lags in reducing its fees, with market participants opting for the newly established, more cost-effective spot bitcoin ETFs.

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JPMorgan Expects $36B of Inflows in Bitcoin ETF via Rotational Capital