According to a report from JPMorgan, a Bitcoin ETF will be beneficial for the first cryptocurrency in the long run, but it could hurt the price of BTC first by raising money from the Grayscale Bitcoin Trust.
According to JPMorgan analysts, there is growing optimism about the possible approval of the US Securities and Exchange Commission (SEC) ETF on bitcoin in connection with the appointment of a new chairman. The ETF launch, however, will create competition for the Grayscale Bitcoin Trust (GBTC), which is currently benefiting from being one of the few cryptocurrency investment opportunities for institutional investors.
Due to regulatory and other restrictions, some financial institutions and funds cannot directly own BTC or buy shares directly from Grayscale. They buy GBTC shares on the secondary market at a premium. If the Bitcoin ETF is launched, investment costs will decrease, which will reduce the attractiveness of GBTC shares.
A decrease in the GBTC markup will also reduce the attractiveness of buying the fund’s shares. Some institutional investors are now buying GBTC stock with the intention of selling their stake after the mandatory six-month lockdown period has expired. If the potential profit from such a sale drops due to the launch of the Bitcoin ETF, it will reduce interest in buying GBTC.
Analysts estimate that about 15% of the issued GBTC shares are acquired with the aim of further selling on the secondary market and earning on the price difference. The prospect of a Bitcoin ETF launch and the associated diminishing returns from selling GBTC shares in the secondary market could also lead some institutional investors who bought shares in the second half of last year to sell them after the six-month lockout period. This will put further downward pressure on the GBTC markup.
Recall that at the end of last year, The Block conducted an annual survey of participants in the cryptocurrency industry and it turned out that half of the respondents are expecting the approval of a Bitcoin ETF in 2021.