The price of bitcoin could face further downward pressure in the coming weeks if investors in Grayscale Bitcoin Bitcoin -2.27% The trust continues to profit, according to JPMorgan.
GBTC converted to a spot bitcoin ETF last week and has already seen outflows of more than $1.5 billion. Last week, JPMorgan estimated up to $3 billion in outflows from GBTC as speculative investors were likely to take profits.
“If the previous estimate of $3 billion proves correct, and given that $1.5 billion has already exited, then there could be another $1.5 billion still to exit the bitcoin space via profit-taking on GBTC, exercising thus further pressure on bitcoin prices in the coming weeks,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a note on Thursday.
GBTC investors – who had purchased the fund’s shares at a significant discount to net asset value over the past year to position themselves for the ETF’s eventual conversion – “realized the full profit post-conversion of the ETF by fully exiting from the bitcoin space rather than moving into cheaper spot bitcoin ETFs,” the analysts said.
GBTC outflows are also adding pressure on the fund to lower its fees, analysts said, reiterating their view that the current 1.5% fee is “too high” compared to other spot bitcoin ETFs.
GBTC “risks further outflows” although, for some institutional investors, fees are not the only reason to consider when deciding whether to switch to cheaper bitcoin spot ETFs, analysts noted.
“Liquidity and market depth also matter, but again there is risk for GBTC on this front even if other spot bitcoin ETFs manage to reach critical mass in terms of size and liquidity,” they said, adding that another $5-10 billion could flow out of GBTC if it loses its liquidity edge.
Limited chance of Ethereum ETF spot approval by May
Last week, Panigirtzoglou told The Block that JPMorgan sees no more than a 50% chance of getting spot approval of the Ethereum ETF by May, the Securities and Exchange Commission’s first deadline to rule on pending applications for such funds.
Reiterating this view in today’s report, JPMorgan analysts said that while they are “sympathetic” to arguments pointing towards potential approval, they are skeptical that the SEC will classify Ethereum as a commodity as early as May.
“If anything, with Ethereum’s transition from proof-of-work to proof-of-stake and the negative impact this transition has had on Ethereum’s decentralization, Ethereum seems more similar to other cryptocurrencies outside of bitcoin, which are considered securities by the SEC.” analysts said.
Additionally, the SEC’s ongoing lawsuits against cryptocurrency exchanges offering proof-of-stake blockchain staking services, including Ethereum, make Ethereum ETF spot approval “more challenging at least until these lawsuits will not be resolved,” the analysts concluded.