The price of bitcoin could face additional downward pressure in the coming weeks if investors in Grayscale Bitcoin Trust continue to take profits, according to JPMorgan.
Grayscale Bitcoin Trust (GBTC) recently converted into a spot bitcoin ETF and has already experienced significant outflows, with over $1.5 billion worth of funds leaving the trust. JPMorgan previously estimated that up to $3 billion could flow out of GBTC as speculative investors take profits.
JPMorgan analysts led by Nikolaos Panigirtzoglou wrote that if the $3 billion estimate proves correct, there could be an additional $1.5 billion exiting the bitcoin space via profit-taking on GBTC, which would put further pressure on bitcoin prices in the coming weeks.
The analysts noted that GBTC investors have been taking full profits and exiting the bitcoin space entirely rather than shifting to cheaper spot bitcoin ETFs. This trend is also adding pressure on GBTC to lower its fees, which are considered too high compared to other spot bitcoin ETFs.
There is a risk for GBTC in terms of liquidity and market depth if other spot bitcoin ETFs gain critical mass in size and liquidity. The analysts warned that an additional $5 billion to $10 billion could exit GBTC if it loses its liquidity advantage.
Limited chance of spot Ethereum ETF approval by May
JPMorgan analysts reiterated their view that there is not more than a 50% chance of spot Ethereum ETF approval by May. They are skeptical that the Securities and Exchange Commission (SEC) will classify Ethereum as a commodity by then.
Ethereum’s transition from proof-of-work to proof-of-stake and ongoing lawsuits against crypto exchanges offering staking services for proof-of-stake blockchains make a spot Ethereum ETF approval more challenging until these issues are resolved, according to the analysts.
Hot Take: Grayscale Bitcoin Trust outflows and the potential impact on bitcoin prices
The recent outflows from Grayscale Bitcoin Trust (GBTC) could exert downward pressure on bitcoin prices in the coming weeks. If the estimated $3 billion in outflows is accurate, with $1.5 billion already exiting, there may be an additional $1.5 billion leaving the bitcoin space through profit-taking on GBTC.
Investors in GBTC have been taking full profits and completely exiting the bitcoin space instead of shifting to cheaper spot bitcoin ETFs. This trend has also highlighted the need for GBTC to lower its fees, which are considered too high compared to other spot bitcoin ETFs.
Furthermore, if other spot bitcoin ETFs gain significant size and liquidity, GBTC could face further challenges in terms of liquidity and market depth. This could lead to an additional $5 billion to $10 billion leaving GBTC if it loses its liquidity advantage.
Overall, the combination of GBTC outflows and potential fee adjustments may impact bitcoin prices negatively in the near future.
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