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JPMorgan Strategists Say U.S. ETF Could Sap Bitcoin Price

Bloomberg logoBloomberg 1/11/2021 Joanna Ossinger
a close up of a green light: Power supply units and cooling fans sit on shelves linked to cryptocurrency mining machines at the SberBit mining 'hotel' in Moscow, Russia, on Saturday, Dec. 9, 2017. Futures on the worlds most popular cryptocurrency surged as much as 26 percent in their debut session on Cboe Global Markets Inc.'s exchange, triggering two temporary trading halts designed to calm the market. Bloomberg © Bloomberg Power supply units and cooling fans sit on shelves linked to cryptocurrency mining machines at the SberBit mining 'hotel' in Moscow, Russia, on Saturday, Dec. 9, 2017. Futures on the worlds most popular cryptocurrency surged as much as 26 percent in their debut session on Cboe Global Markets Inc.'s exchange, triggering two temporary trading halts designed to calm the market. Bloomberg

(Bloomberg) -- U.S. approval of a Bitcoin exchange-traded fund could weigh on the digital coin’s price in the short term, according to JPMorgan Chase & Co.

That’s because competition from such a vehicle could spark outflows from the Grayscale Bitcoin Trust, the world’s largest traded cryptocurrency fund. The ETF would erode the Grayscale trust’s effective monopoly, sparking outflows and a slide in its premium to net asset value -- which in turn could hurt Bitcoin’s price, strategists led by Nikolaos Panigirtzoglou wrote in a note.

“A cascade of GBTC outflows and a collapse of its premium would likely have negative near-term implications for Bitcoin given the flow and signaling importance of GBTC,” they said Friday.

Some commentators view approval of a Bitcoin ETF in the U.S. as more likely with changing leadership at the Securities and Exchange Commission. VanEck Associates Corp. recently filed with the regulator to offer one, after standing down from a previous effort. The JPMorgan strategists said introduction of a Bitcoin ETF should be positive for the cryptocurrency in the longer term.

Read more:
VanEck Lists Bitcoin ETN Amid Wave of Interest in Cryptocurrency
Bitcoin Should Hit $150,000 Before an ETF Can Work, Tom Lee Says
Crypto ETF Advocates Face SEC Resistance Despite Strategic Shift

Bitcoin slumped on Monday, sliding as much as 15% to about $32,400. The drop shook faith in the volatile cryptocurrency boom. The digital coin, which reached a record high of almost $42,000 as recently as Jan. 8, traded at $35,400 as of 8:26 a.m. in London.

(Updates with latest Bitcoin move in last paragraph.)

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