Analysts from American investment bank JPMorgan project the downtrend momentum experienced by Bitcoin to slow as investors conclude the GBTC profit taking. The analysts observed that profit-taking decisions by investors within the Grayscale Bitcoin Trust (GBTC) exerted downward pressure on Bitcoin, thereby curtailing Bitcoin’s price.
GBTC Outflows Surpass $4 Billion
GBTC has seen over $4.3 billion in outflows since the approval by the US Securities and Exchange Commission (SEC) on January 10. Since then, GBTC has converted to the spot bitcoin exchange-traded fund (ETF) and surpassed JPMorgan’s $3 billion forecast.
On Thursday, January 25, JPMorgan analysts observed that the GBTC profit-taking had already occurred. Nikolaos Panigirtzoglou noted that the conclusion of profit-taking implies that the majority of the downward pressure exerted on Bitcoin from that channel is largely slipping behind.
Panigirtzoglou noted that the price of Bitcoin had plunged by over 20% in the fortnight after the spot Bitcoin ETF approval. The analysts attributed the decline to the widespread move by GBTC investors to cash in profits.
The analysts are optimistic that the worst downside pressure is over. Nonetheless, the Panigirtzoglou-led team cautioned that failure to lower the 1.5% fee by GBTC would reignite the outflows as investors switch to cheaper products.
Fidelity and BlackRock Gain Ground
Panigirtzoglou observed that GBTC faces emerging rivalry from BlackRock and Fidelity that, by the time of the note publication, realized $1.9B and $1.8B inflows. The two funds have lower fees at 25 basis points enforced without waivers versus the 150 basis points imposed by GBTC.
JPMorgan Hails Spot Bitcoin ETFs as Enhancing Bitcoin Price Discovery
JPMorgan analysts noted that unveiling spot Bitcoin ETFs within the US offers a new channel to facilitate BTC price discovery. The newly approved product aligns crypto to the conventional markets, particularly equities, where ETFs are the norm.
The analysts highlight that while the face value of spot Bitcoin ETFs’ unveiling suggests more fragmentation, it would gradually increase the market depth and liquidity. Such is bound to match the traditional asset classes’ experience as a guide.
The JPMorgan analysts are optimistic that the spot Bitcoin ETFs will meet the anticipation of becoming the channel for Bitcoin price discovery in an efficient process.
Ultimately, the analysts indicated that the approval of GBTC’s plan to unveil the covered call ETF would deliver a critical boost for the fund. Besides, the JPMorgan analysts indicate that the covered call ETF would enhance Bitcoin’s derivatives markets.
The path to avoiding the huge outflows and loss of market share to rival ETFs mandates GBTC to lower the fees.
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