JPMorgan’s New Report: ETF Approval Could Negatively Impact Grayscale’s Bitcoin Fund!

• According to a research report released by JPMorgan on Thursday, a significant portion of Grayscale Bitcoin Trust (GBTC) shares were purchased on the secondary market at a deep discount to net asset value (NAV) this year.
• Nevertheless, the bank expressed the view in the report that “there is a high probability that some of this $2.7 billion will exit entirely from the Bitcoin space.”
• Grayscale continues its discussions with the U.S. Securities and Exchange Commission (SEC) regarding its application for a spot Bitcoin ETF and has held a meeting this week.

JPMorgan examined the potential effects of spot Bitcoin ETF approval on GBTC while evaluating Grayscale’s Bitcoin Trust fund.

JPMorgan Assessed Grayscale Bitcoin Fund

According to a research report released by JPMorgan on Thursday, a significant portion of Grayscale Bitcoin Trust (GBTC) shares were purchased on the secondary market at a deep discount to net asset value (NAV) this year. This situation arises from the expectation that the trust will be converted into an exchange-traded fund (ETF) approved by the U.S. Securities and Exchange Commission (SEC).

The bank estimates that a net $2.5 billion has flowed into GBTC since the beginning of the year, and this amount increases to $2.7 billion when short interest closures are added. Analysts led by Nikolaos Panigirtzoglou wrote:

“If we assume that this buying flow is mostly speculative for the conversion of GBTC into an ETF, then the likelihood is high that this $2.7 billion will exit GBTC when these investors make a profit when GBTC converts.”

The analysts continued: “If this $2.7 billion exits completely from the Bitcoin space, then such an exit will certainly exert significant downward pressure on Bitcoin prices. If the majority of this $2.7 billion shifts to other Bitcoin instruments, such as newly created spot Bitcoin ETFs after SEC approval, any adverse market impact will be more limited.”

Nevertheless, the bank expressed the view in the report that “there is a high probability that some of this $2.7 billion will exit entirely from the Bitcoin space.” The report also added that if GBTC’s fees are not aggressively reduced after its conversion to an ETF, a much larger portion of the $2.7 billion could exit.

What’s the status of Grayscale’s ETF application?

Grayscale continues its discussions with the U.S. Securities and Exchange Commission regarding its application for a spot Bitcoin ETF and held a meeting this week. Additionally, Grayscale updated its spot Bitcoin ETF application this week. According to the information in this update, if the ETF application is approved, Grayscale’s ETF code will be “BTC,” which is a significant detail.