JPMorgan’s latest research report reveals a significant impact on Bitcoin (BTC) prices, witnessing a 15% drop since the debut of spot exchange-traded funds (ETFs) last week. Approximately $1.5 billion has exited the Grayscale Bitcoin Trust (GBTC), further intensifying the downward pressure, according to the report released on Thursday.
The report suggests that investors who had previously acquired GBTC at a notable discount to Net Asset Value (NAV) throughout the past year, anticipating its eventual ETF conversion, are now opting for full-profit realization. Instead of transitioning to more economical spot Bitcoin ETFs, these investors are exiting the Bitcoin space altogether.
Before its transformation into an ETF, GBTC served as one of the primary avenues for U.S. stock traders to gain exposure to Bitcoin’s price movements without directly purchasing the cryptocurrency. As the largest regulated Bitcoin fund globally by Assets Under Management (AUM), the fund’s shift to ETF status has triggered substantial profit-taking actions.
JPMorgan had earlier estimated that around $3 billion entered GBTC in the secondary market in 2023 to exploit the trust’s discount to NAV. With $1.5 billion already withdrawn, the potential for an additional $1.5 billion exiting the market through profit-taking on GBTC looms large, adding further stress on Bitcoin prices in the near future.
The report indicates that these outflows are compelling GBTC to reconsider its fees, as the current fee of 1.5% appears comparatively high against other spot Bitcoin ETFs, potentially leading to more outflows.
JPMorgan cautions that the situation could escalate, with an additional $5 billion to $10 billion potentially leaving GBTC if it loses its liquidity advantage. Currently, GBTC stands as the most expensive ETF among its counterparts, prompting a need for fee adjustments to avoid further capital flight.
In contrast, JPMorgan notes that other spot Bitcoin ETFs, excluding GBTC, have witnessed substantial inflows of $3 billion in just four days. This trend aligns with previous Bitcoin product launches and is largely attributed to a rotation from existing Bitcoin vehicles, such as futures-based ETFs, reflecting the dynamic nature of the cryptocurrency market.
