US approval of a Bitcoin exchange-traded fund could weigh on the price of the digital currency in the short term, according to JPMorgan Chase & Co.
This is because competition from such a vehicle could generate outflows from the Grayscale Bitcoin Trust, the largest traded cryptocurrency fund in the world. The ETF would erode the effective monopoly of the grayscale fund, generating outflow and a drop in its premium relative to the asset’s net worth – which could hurt Bitcoin’s price, strategists led by Nikolaos Panigirtzoglou wrote in a note.
“A cascade of outgoing GBTC flows and a collapse of its premium would likely have negative short-term implications for Bitcoin, due to the flow and the importance of GBTC signaling,” they said on Friday.
Some commentators see the approval of a Bitcoin ETF in the U.S. as more likely with the change of leadership in the Securities and Exchange Commission. VanEck Associates Corp. recently filed with the regulator to offer one after withdrawing from a previous effort. JPMorgan strategists said the introduction of a Bitcoin ETF should be positive for cryptocurrency in the long run.
Bitcoin plummeted on Monday, dropping 15% to around $ 32,400. The fall has shaken faith in the volatile cryptocurrency boom. The digital currency, which hit a record high of almost $ 42,000 on January 8, traded at $ 35,400 at 8:26 am in London.
(Updates with the latest Bitcoin move in the last paragraph.)