It’s unclear how much new capital the new bitcoin exchange-traded funds (ETFs) will attract, but significant funds are expected to flow in from other cryptocurrency products, JPMorgan said in a research report Thursday.
Market reaction to the US Securities and Exchange Commission (SEC) decision Hesitant approval Spot Bitcoin (BTC) ETFs have been relatively weak, the report said, with the focus now shifting to how much capital these new ETFs will withdraw.
“We are skeptical of the optimism currently shared by many market participants that a lot of new capital will enter the crypto space as a result of the immediate approval of a Bitcoin ETF,” the analysts led by Nikolaos Panigirzoglou wrote.
However, the bank sees a significant shift from existing cryptocurrency products to newly created ETFs, so even if no new capital enters the cryptocurrency market, the new ETFs could still attract inflows of up to $36 billion.
The bank says about $3 billion could exit the Grayscale Bitcoin Trust (GBTC) and move into new spot ETFs as a result of investors taking profits after purchasing discounted GBTC shares on the secondary market last year. It is also seeing up to $20 billion of retail investors migrate from existing digital wallets on cryptocurrency exchanges to new ETFs.
Grayscale’s high fees could also trigger outflows, and unless it lowers its rates toward the level set by Blackrock (BLK) and other providers, “more capital, perhaps an additional $5 billion-$10 billion, could exit GBTC quickly.” relatively to migrate towards cheaper.” “Spot Bitcoin ETFs,” the bank added.
The report added that institutional investors who hold their cryptocurrencies in the form of a fund could shift from futures-based ETFs and GBTC to cheaper spot ETFs, especially if GBTC is slow to reduce its fees.
Read more: Bitcoin ETF Approval Likely to Benefit Institutional Investors: Goldman Sachs