JPMorgan Downplays Impact Of Spot Bitcoin ETF Applications, Citing Historical Trends

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July 7, 2023 by Mohammad Ali

JPMorgan, a leading banking giant, has expressed skepticism regarding the impact of recent spot Bitcoin ETF applications on the cryptocurrency space. Following BlackRock’s filing of a spot Bitcoin ETF last month, which triggered a surge in BTC prices to $31,000, other significant players like Fidelity and WisdomTree also submitted their applications to the US Securities and Exchange Commission (SEC).

In a research report published on Thursday, July 6, JPMorgan outlined several reasons behind its analysis, tempering the optimistic outlook in the market. The primary concern raised by JPMorgan is the SEC’s historical reluctance to approve spot Bitcoin ETFs. While previous applications were rejected, investors are hopeful that the concerns raised by the SEC have been adequately addressed this time.

Nikolaos Panigirtzoglou, head of JPMorgan’s analysts, highlighted, “Spot bitcoin ETFs have existed for some time outside the U.S., in Canada and Europe, but have failed to attract large investor interest.”

JPMorgan Foresees Bright Future For Spot Bitcoin ETFs

JPMorgan further emphasized that spot Bitcoin ETFs will likely surpass futures-based ETFs in the long run due to their ability to reflect real-time supply and demand. The approval of spot ETFs in the United States could enhance liquidity and improve price transparency in spot Bitcoin markets, according to the JPMorgan report obtained by CoinDesk.

The report also highlighted certain advantages of physically backed Bitcoin ETFs over futures-based funds, albeit minor ones. Spot ETFs provide a more straightforward and secure method for investing in Bitcoin, eliminating complexities related to custody, BTC transfer, and the basis risk associated with futures-based products.

In addition, the JPMorgan report noted that Bitcoin funds, including both futures-based and physically backed funds, have experienced sluggish inflows since Q2 2021. Furthermore, they have failed to benefit from investor outflows from gold ETFs over the past year.

As the crypto community eagerly awaits the SEC’s decision on the pending spot Bitcoin ETF applications, JPMorgan’s cautious stance serves as a reminder of the challenges faced by such funds in the past. Despite renewed optimism among investors, only time will tell if spot Bitcoin ETFs will gain significant traction and reshape the cryptocurrency investment landscape in the United States.

Related Reading: | BlackRock CEO Larry Fink: Beyond Bitcoin, The Rise Of Tokenization In Crypto

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