JPMorgan Projects $1.5B Risk from Future Bitcoin GBTC Sales

• Bitcoin Drops 15% Following Launch of Spot Exchange-Traded Funds
• Investors Cash in on GBTC Funds
• The Uplisting of GBTC from a Trust to an ETF
• Estimated Investment and Potential Exit
• Pressure on GBTC to Lower Fees
• GBTC as the Most Expensive ETF
• The Allure of Other Spot Bitcoin ETFs

Bitcoin Drops 15% Following Launch of Spot Exchange-Traded Funds

The introduction of spot exchange-traded funds (ETFs) last week brought about a significant decrease in Bitcoin$42,260 -0.64% (BTC) prices, with a consequential $1.5 billion outflow from Grayscale Bitcoin Trust (GBTC), as reported by financial titan JPMorgan (JPM).

Investors Cash in on GBTC Funds

Over the last year, GBTC investors have been acquiring GBTC fund at a considerable discount to NAV, anticipating its inevitable ETF conversion. These investors have been capitalising on their investment post-ETF conversion by exiting the bitcoin arena entirely, instead of migrating to more affordable spot bitcoin ETFs.

The Uplisting of GBTC from a Trust to an ETF

Prior to its uplisting to an ETF, GBTC was one of the few channels for stock traders in the U.S. to access bitcoin price fluctuations without the necessity to purchase the actual cryptocurrency. This made it the largest regulated Bitcoin fund globally by AUM, according to data available.

Estimated Investment and Potential Exit

JPMorgan's previous estimation placed the investment in GBTC in the secondary market during 2023 at up to $3 billion, aimed at exploiting the trust's discount to NAV. If this estimate holds true, and considering the $1.5 billion that has already exited, an additional $1.5 billion could leave the market via profit-taking on GBTC, exerting further downward pressure on Bitcoin prices in the ensuing weeks.

Pressure on GBTC to Lower Fees

The exodus of funds is also compelling GBTC to reconsider its fees, the report noted. It further pointed out the GBTC fee of 1.5% as being disproportionately high compared to other spot Bitcoin ETFs, which potentially hints at further outflows. The bank warned that GBTC may lose between $5 billion to $10 billion if it loses its liquidity advantage.

GBTC as the Most Expensive ETF

As of the previous Friday, GBTC was the costliest ETF compared to its counterparts, with a few charging zero fees for the initial six months or until a specific assets under management (AUM) target is achieved.

The Allure of Other Spot Bitcoin ETFs

JPMorgan pointed out that other spot Bitcoin ETFs, excluding GBTC, pulled in $3 billion of inflows in merely four days. This figure mirrors the inflows witnessed during past Bitcoin product launches. The majority of this $3 billion of inflows signifies a rotation from existing Bitcoin vehicles such as futures-based ETFs.

Edited by Jonathan Stoker