JPMorgan has warned that the Bitcoin price could face additional downward pressure in the coming weeks if investors in the Grayscale Bitcoin Trust (GBTC) continue to take profits.
GBTC was converted into a spot Bitcoin Spot ETF last week and has already seen outflows of over $1.5 billion. Last week, JPMorgan predicted an outflow of up to $3 billion from GBTC due to the possibility of speculative investors taking profits.
JPMorgan analysts led by Nikolaos Panigirtzoglou said in a note today:
“If the previous $3 billion estimate proves correct and $1.5 billion has already exited, there could be another $1.5 billion to exit the Bitcoin space via profit taking in GBTC, which could put further pressure on Bitcoin prices in the coming weeks.”
Analysts said GBTC investors, who positioned themselves for possible ETF conversion by purchasing shares of the GBTC fund at a significant discount to net asset value over the past year, “exited the Bitcoin space entirely rather than switching to cheaper spot Bitcoin ETFs, making full profits post-ETF conversion.” .
Stating that outflows from GBTC also put pressure on the fund to reduce its fees, analysts reiterated the view that the current 1.5% fee is “too high” compared to other spot Bitcoin ETFs.
Analysts noted that GBTC poses “more outflow risk” for some institutional investors, even if fees are not the only reason to consider when deciding whether to switch to cheaper spot Bitcoin ETFs.
“Liquidity and market depth are also important, but there is risk for GBTC on this front as well if other spot Bitcoin ETFs manage to reach the critical level in terms of size and liquidity,” analysts said, adding that another $5 billion to $10 billion could emerge from GBTC if it loses its liquidity advantage. .
JPMorgan analysts said that while they were “sympathetic” to arguments pointing to Ethereum's potential approval, they were skeptical that the SEC would classify Ethereum as a commodity as soon as May.
“With Ethereum's transition from proof-of-work to proof-of-stake and the negative impact of this transition on Ethereum decentralization, Ethereum is becoming more similar to other cryptocurrencies other than Bitcoin, which are considered securities by the SEC,” analysts said.
Additionally, ongoing lawsuits filed by the SEC against crypto exchanges that provide staking services for proof-of-stake blockchains, including Ethereum, make Ethereum ETF approval more difficult “at least until these lawsuits are resolved,” according to analysts.
*This is not investment advice.