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Spot Bitcoin ETFs Poised for $36 Billion Influx, JPMorgan Highlights Rotational Capital Movement

JPMorgan analysts, challenging the general anticipation of a substantial surge in new investment, predict that spot Bitcoin (BTC) ETFs might only see up to $36 billion in inflows, primarily transferred from current crypto assets.

In a detailed analysis, the JPMorgan team, headed by Nikolaos Panigirtzoglou, anticipates these inflows to comprise around $3 billion from Bitcoin futures-based ETFs, $3-$13 billion from the Grayscale Bitcoin Trust (GBTC), and a significant $15-$20 billion shifted by retail investors from digital wallets and brokers to spot Bitcoin ETFs. However, they did not provide a specific timeline for these expected movements.

Contrasting with the prevailing optimism about spot Bitcoin ETFs bringing a major influx of new funds into crypto, the JPMorgan analysts express caution. They suggest that the actual new capital entering the cryptocurrency market will likely depend more on regulatory changes and how much regulators allow crypto to merge with the traditional financial system over time.

SEC Approves Spot Bitcoin ETFs

In an unprecedented move, the U.S. Securities and Exchange Commission (SEC) has approved 11 spot Bitcoin ETFs, breaking away from over a decade of regulatory resistance. This milestone enables major financial institutions like BlackRock, Invesco, and Fidelity to offer direct investments in Bitcoin-focused funds.

On their first day of trading, these spot Bitcoin ETFs have generated an impressive $4 billion in trading volume, according to Yahoo Finance data.

JPMorgan’s analysis suggests that the success of these new ETFs will largely depend on factors such as fees and liquidity. They highlight the high 1.5% fees of the Grayscale Bitcoin Trust (GBTC) and predict substantial outflows from it as a result.

Additionally, the analysts foresee actions from speculative investors who have been buying GBTC shares at a discount on the secondary market over the past year, betting on the discount’s removal upon conversion to an ETF. These investors are expected to realize profits, potentially leading to about $3 billion shifting from GBTC to these new spot Bitcoin ETFs.

JPMorgan Anticipates Outflows if GBTC Does Not Reduce Fees

The experts predict that if GBTC doesn’t lower its fees to the 0.25% benchmark set by companies like BlackRock, there could be an even larger exodus of funds, potentially ranging from $5 to $10 billion.

Moreover, should GBTC lose its position as the top Bitcoin fund globally, the current liquidity benefits it enjoys due to its size might lessen, leading to additional withdrawals.

In sum, JPMorgan’s analysts believe that individual investors are likely to prefer direct Bitcoin ETFs.

Conversely, institutional investors who currently hold their cryptocurrencies in fund formats might shift away from futures-based ETFs and GBTC, opting instead for the newer, more economical direct Bitcoin ETFs.

In the meantime, Mike Novogratz, a prominent crypto advocate and CEO of Galaxy Digital, has predicted a fierce competition for market leadership among Invesco, BlackRock, and Fidelity.

During a discussion on CNBC, Novogratz noted that the market for cryptocurrency ETFs is not uniform.

He pointed out that the key to success in this nascent market lies in aspects like execution quality, liquidity, and concealed charges, rather than just the reduction of expense ratios.

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

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