JPMorgan Skeptical of Impact of Spot Bitcoin ETFs on Crypto Space

JPMorgan Skeptical of Impact of Spot Bitcoin ETFs on Crypto Space

A recent research report by JPMorgan, the banking giant, suggests that the introduction of spot Bitcoin ETFs in the United States may not have a significant impact on the crypto space. While the filing of a spot Bitcoin ETF by BlackRock and subsequent applications by other major players like Fidelity and WisdomTree have generated optimism, JPMorgan remains skeptical for several reasons.

One key factor is that the US Securities and Exchange Commission (SEC) has yet to approve a spot Bitcoin ETF. Historically, the SEC has rejected multiple applications for such ETFs. However, investors are hopeful this time, believing that the SEC’s previous concerns have been addressed, according to JPMorgan.

JPMorgan’s analysts, led by Nikolaos Panigirtzoglou, noted that spot Bitcoin ETFs have been available in countries like Canada and Europe but have failed to attract substantial investor interest. Despite this, the report suggests that spot Bitcoin ETFs could eventually surpass futures-based ETFs. The advantage lies in their ability to reflect real-time supply and demand, which would bring more liquidity and enhance price transparency in spot Bitcoin markets, as stated in the JPMorgan report accessed by CoinDesk.

Furthermore, the report highlights that physical-backed Bitcoin ETFs offer certain advantages over futures-based funds, albeit relatively minor ones. Spot ETFs provide a simpler and more secure means of investing in Bitcoin, eliminating complexities associated with custody, Bitcoin transfer, and basis risk inherent in futures-based products.

Additionally, the report reveals that the flow of funds into Bitcoin funds has been relatively slow. Bitcoin funds, encompassing both futures-based and physically backed funds, have failed to attract substantial investor interest since Q2 2021. Moreover, they have not benefited from investor outflows from gold ETFs over the past year or so, according to the report.

Overall, while the introduction of spot Bitcoin ETFs in the US market has generated excitement and optimism, JPMorgan’s research suggests that these ETFs may not have a transformative impact on the crypto space. The report outlines various reasons for this outlook, including the SEC’s historical stance on Bitcoin ETFs and the relatively subdued investor interest in similar offerings outside the US.