JPMorgan: Approval of Bitcoin ETF Can Have Negative Effect on BTC Price
The investment wing of banking giant JPMorgan has been recently more vocal on the developments happening in the crypto space. In a fresh statement, the JPMorgan analysts said that approval of Bitcoin Exchange-traded-fund (ETF) can possibly have a negative effect on the BTC price in the short term.
Just as Bitcoin has hit a new high above $41,500, the market remains optimistic about the SEC giving a serious thought on the approval of Bitcoin ETF. In the past, the SEC has rejected multiple proposals for the Bitcoin ETF. However, the market optimism has revived after previous chairman Jay Clayton resigned last month and we have a crypto-friendly chairman at the helm of affairs.
Explaining the reason behind their prediction, JPMorgan chief strategist Nikolaos Panigirtzoglou wrote: “The reason is a potential decline in the Grayscale Bitcoin Trust (GBTC) premium to NAV [net asset value] from the introduction of bitcoin ETF in the US, which would unwind a big portion of GBTC investments currently placed for monetizing this premium.”
Grayscale is currently operating the biggest Bitcoin fund with over $20 billion in assets under management. Any competition would spark outflows from the Grayscale Bitcoin Trust (GBTC) say JPMorgan analysts.
“A cascade of GBTC outflows and a collapse of its premium would likely have negative near-term implications for Bitcoin given the flow and signaling importance of GBTC,” they said.
Most of the institutional players have subscribed to the Grayscale Bitcoin Trust (GBTC) during the second-half of last year 2020 with the purpose of selling after the 6-month unlock period. Thus, when the investment matures during the first half of 2021, JPMorgan thinks that the existence of Bitcoin ETF could put a downward pressure on GBTC premiums.
However, JPMorgan analysts in the report have acknowledged that the arrival of Bitcoin ETF could be beneficial in the long term.
Many of the crypto industry have not agreed to what JPMorgan has to say! VanEck Associates who has filed for an Bitcoin ETF in the past have disagreed to it. Gabor Gurbacs the CEO of VanEck wrote: “I believe that a bitcoin ETF may bring many structural benefits to the bitcoin as well as traditional financial markets. The approval of a bitcoin ETF would be positive for bitcoin in the near as well as long term.”