JPMorgan Suggests Eased Bitcoin Selling Pressure as GBTC Profit Taking Ends

• Bitcoin Selling Pressure May Be Easing, JPMorgan Suggests
• GBTC: A Main Investing Vehicle for Bitcoin
• Outflow from GBTC
• Moving to Spot Bitcoin ETFs
• Additional Selling Pressure

Bitcoin Selling Pressure May Be Easing, JPMorgan Suggests

A recent research report by JPMorgan (JPM) suggests that the selling pressure on bitcoin (BTC), the world's leading cryptocurrency, might be largely over. The report points out that profit-taking in the Grayscale Bitcoin$42,260 -0.64% Trust (GBTC) by investors who bought the fund at a discount was a key factor in the recent 20% drop in bitcoin's value, seen in the two weeks following the launch of U.S. spot bitcoin exchange-traded funds (ETFs).

GBTC: A Main Investing Vehicle for Bitcoin

GBTC was, before its conversion to an ETF, one of the limited means for U.S. investors to gain exposure to bitcoin without owning the cryptocurrency itself. Despite a shift towards other vehicles, GBTC remains the largest bitcoin investment product with over $20 billion in managed assets.

Outflow from GBTC

JPMorgan had earlier projected an outflow of approximately $3 billion from GBTC due to profit-taking from the 'discount to net asset value' (NAV) trade. As investors realize profits from this trade, money exits the crypto market, thereby exerting a downward force on bitcoin's price. However, the report suggests that most of the GBTC profit-taking has already occurred, given that $4.3 billion has already exited GBTC. The report's authors, led by Nikolaos Panigirtzoglou, contend that the majority of the downward pressure on bitcoin from this channel might be in the rearview mirror.

Moving to Spot Bitcoin ETFs

JPMorgan's calculations estimate that around $1.3 billion has transitioned from GBTC to newly established spot bitcoin ETFs, which offer lower costs. This transition represents a monthly outflow of $3 billion. The continuation of these outflows is likely if Grayscale doesn't reduce its fees quickly and could pick up pace if other spot ETFs achieve the necessary size and liquidity to compete with GBTC, the report added.

Additional Selling Pressure

The bankruptcy estate of crypto exchange FTX$3.28 -5.38% also added to selling pressure by offloading around $1 billion worth of GBTC since its conversion to an ETF. This added selling pressure was reflected in the underlying digital asset, the report indicated.

Edited by Jonathan Stoker