JP Morgan recently said that Grayscale Bitcoin Trust could see $2.7B of outflows if Grayscale Bitcoin Trust ETF Conversion Approved. Since the start of the year, traders have been acquiring GBTC shares at a significant discount. The report highlights a potential scenario where Bitcoin prices might face pressure due to a potential outflow of funds from the ecosystem.
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Grayscale Bitcoin Trust ETF Conversion
According to JPMorgan, a significant number of Grayscale Bitcoin Trust (GBTC) shares were purchased at a significant discount to their net asset value (NAV) in anticipation of the trust’s conversion into an exchange-traded fund (ETF), pending approval from the U.S. Securities and Exchange Commission (SEC).
JPMorgan’s research suggests that approximately $2.5 billion has entered GBTC since the beginning of the year, with an additional $200 million accounting for the covering of short interest.
The analysts, led by Nikolaos Panigirtzoglou, propose that if this buying activity was speculative, driven by expectations of GBTC becoming an ETF, the $2.7 billion influx could exit GBTC as investors take profits post-conversion. This potential withdrawal could exert significant downward pressure on Bitcoin prices.
The analysts speculate on two potential outcomes:
- Either the $2.7 billion exits the Bitcoin space entirely, leading to a substantial negative impact on prices
- It shifts into other Bitcoin instruments, such as newly established spot Bitcoin ETFs post-SEC approval, resulting in a more moderate market impact.
Risk for Bitcoin Prices
Despite this, JPMorgan expresses a downside risk for Bitcoin prices, emphasizing the possibility that some portion of the $2.7 billion might exit the Bitcoin market. The report also raises the concern that more than $2.7 billion could leave GBTC if its fees are not aggressively lowered after the conversion into an ETF.
To conclude, JP Morgan says that Grayscale Bitcoin Trust could see $2.7B of outflows if ETF conversion is approved giving rise to a downside risk to Bitcoin prices. It is important to closely monitor the market impact of GBTC’s conversion dynamics.
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