Cryptocurrency markets have seen net inflows of $12 billion since the beginning of the year.
The bank said most of the $16 billion inflow into spot bitcoin ETFs likely came from existing digital wallets on the exchanges.
JPMorgan said it was skeptical that the pace of inflows would continue for the rest of the year.
Digital assets have seen net inflows of $12 billion year-to-date, and if flows continue at the same pace, the number could grow to $26 billion by the end of the year, JPMorgan (JPM) said in a Wednesday’s research report.
Spot bitcoin (BTC) exchange traded funds (ETFs) led the way, attracting $16 billion in net inflows, the report said. This number, when combined with Chicago Mercantile Exchange (CME) futures flows plus capital raised by crypto venture capital funds, increases the total inflow into digital asset markets to $25 billion this year.
However, not all of these inflows represent new money entering the crypto space. “We believe there has likely been a significant rotation from digital wallets on exchanges to new bitcoin spot ETFs,” analysts led by Nikolaos Panigirtzoglou wrote.
This rotation is highlighted by the decline in bitcoin reserves across exchanges since the launch of spot ETFs in January, which is estimated at 0.22 million bitcoin or $13 billion, the bank said.
“This implies that most of the $16 billion inflow into spot bitcoin ETFs since launch likely reflects a rotation from existing digital wallets on exchanges,” the authors wrote. Using this assumption reduces net flow into digital assets year-to-date to $12 billion from $25 billion, the bank said.
This net inflow of $12 billion is stronger than last year, but is significantly lower than the 2021/2022 bull run, the report adds.
Given how high the price of bitcoin is compared to miners’ cost of production or compared to the cost of gold, JPMorgan said it is skeptical that inflows will continue at the same pace for the rest of the year.
To know more: Mainstream adoption of cryptocurrencies has increased in recent months, Canaccord says
