JPMorgan Predicts Outflows from GBTC if Converted to ETF
JPMorgan analysts have projected that the Grayscale Bitcoin Trust (GBTC) could experience outflows of at least $2.7 billion if it is converted into a spot Bitcoin exchange-traded fund (ETF). Traders have been buying GBTC shares at a discount, aiming to profit by selling them if the trust converts to an ETF and the share price rises to match its Bitcoin assets.
Methodology and Estimated Outflow
The JPMorgan analysts explained their methodology, which involved calculating the net cumulative flow into GBTC since the beginning of the year. Based on this calculation, they estimated that the conversion to an ETF could result in outflows of around $2.7 billion as investors sell off shares. This estimate could be even higher unless GBTC’s current fee of 200 basis points is reduced to around 50 basis points.
Competition in Management Fees
Cathie Wood’s ARK Investment Management and 21Shares recently updated their spot Bitcoin ETF application, adjusting the management fee from 70 basis points to 80. This indicates that running these products may cost more than initially anticipated. The average fee for US-listed ETFs is around 54 basis points.
Hot Take: Potential Outflows from GBTC Conversion
JPMorgan analysts predict that if the Grayscale Bitcoin Trust (GBTC) converts to an exchange-traded fund (ETF), it could see outflows of at least $2.7 billion as traders sell off their shares. The current discount on GBTC shares has attracted investors looking to profit from a potential rise in share price upon conversion. JPMorgan’s methodology for estimating the outflows takes into account the net cumulative flow into GBTC since the beginning of the year. However, the estimated outflow could be even higher unless GBTC’s current fee is reduced. The competition in management fees among Bitcoin ETFs is also a factor to consider.
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