Traders May Cash Out Upon Grayscale Bitcoin Trust Conversion to ETF
Traders have been buying shares of the Grayscale Bitcoin Trust (GBTC) in anticipation of its conversion to a spot bitcoin ETF. This has caused GBTC shares to trade at a discount to the value of its bitcoin holdings. Analysts at JPMorgan estimate that around $2.7 billion worth of GBTC shares could be sold upon the conversion.
To calculate this figure, JPMorgan analysts examined GBTC inflows since 2023. They used a methodology that takes into account the daily volume, price changes, and short interest covering. The analysts also noted that most of the buying activity was driven by speculation about the ETF conversion.
Minimum Outflow of $2.7 Billion Expected
JPMorgan expects a minimum outflow of $2.7 billion from GBTC once it becomes an ETF. However, if GBTC’s current fee of 200 basis points is not significantly lowered after the conversion, the outflow could be even higher. The analysts predict that competition among bitcoin ETFs will lead to fees converging towards those of Gold ETFs, which currently stand at around 50 basis points.
The analysts also mentioned that ARK 21Shares Bitcoin ETF has indicated a fee of 80 basis points. To avoid severe outflows and maintain its dominance as the largest and most liquid bitcoin fund, GBTC would need to lower its fee accordingly.
Impact on the Market
If the expected $2.7 billion outflow occurs, it could put downward pressure on bitcoin prices. However, the analysts believe that most of this amount will be shifted into other bitcoin instruments such as spot bitcoin ETFs post-SEC approval. This would result in a more modest negative market impact.
Nevertheless, the analysts caution that the balance of risks for bitcoin prices is skewed to the downside. They expect some of the $2.7 billion to completely exit the bitcoin space, leading to a change in the balance of assets in the bitcoin fund space.
Binance Settlement Seen as Positive
JPMorgan also reiterated its view that Binance’s recent settlement with U.S. agencies is positive for the crypto exchange and the industry as a whole. The settlement is expected to contain Binance’s market share loss and may even reverse it once the implications become clearer. The analysts believe that this settlement reinforces the trend towards regulated crypto entities and instruments, attracting traditional market participants and investors.
Hot Take: Traders Anticipate GBTC Conversion to ETF, Potential Outflows Could Impact Bitcoin Prices
Traders have been buying shares of Grayscale Bitcoin Trust (GBTC) in anticipation of its conversion to an ETF. Analysts estimate that around $2.7 billion worth of GBTC shares could be sold once the conversion takes place. This could put downward pressure on bitcoin prices, although most of the outflow is expected to shift into other bitcoin instruments such as spot bitcoin ETFs post-SEC approval.
JPMorgan analysts also noted that GBTC would need to significantly lower its fee after conversion to avoid more severe outflows and maintain its dominance in the market. Additionally, they see Binance’s recent settlement with U.S. agencies as positive for both Binance and the overall crypto industry, reinforcing the trend towards regulated entities and attracting traditional investors.
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