JP Morgan’s analysts say the U.S. Securities and Exchange Commission (SEC) approving a bitcoin exchange-traded fund (ETF) is likely to be negative for bitcoin in the short term. There is optimism about the prospect of the SEC approving a bitcoin ETF under new leadership, the analysts say.
SEC approval of Bitcoin ETF can be negative
JP Morgan released a report on Friday discussing the impact of an SEC-approved bitcoin ETF on the bitcoin market. Optimism surrounding the prospect of the SEC approving a US bitcoin ETF this year has risen in anticipation of SEC leadership changes, The analysts wrote, stating:
The approval of a bitcoin ETF in the US this year would likely be negative for bitcoin in the short term.
The analysts, including strategist Nikolaos Panigirtzoglou, went on to explain why they forecast a negative outlook. “The reason is a possible drop in the Grayscale Bitcoin Trust (GBTC) premium for NAV [net asset value] of the introduction of bitcoin ETF in the US, which would reduce much of the GBTC investment currently placed to monetize this premium. “
They commented, “Some institutional investors have likely subscribed to GBTC (at NAV) in the second half of last year with the intention of selling after the 6 million unlock period … As the 6 million unlock period ends, some of these institutional investors will sell GBTC during the first half of 2021 to monetize the premium. If it materializes, this selling pressure would put downward pressure on GBTC premiums. “
Emphasizing that a bitcoin ETF would provide an alternative investment vehicle to GBTC for institutional investors, JP Morgan’s analysts concluded:
A cascade of GBTC outflows and a premium collapse would likely have negative consequences for bitcoin in the short term, given the flow and signaling importance of GBTC.
Nonetheless, JP Morgan’s analysts admitted in their report that the approval of a bitcoin ETF in the US would be positive for bitcoin in the long run.
Many people on Twitter disagree with JP Morgan’s analysts’ assessment that a SEC-approved bitcoin ETF would be negative for the industry at all. Gabor Gurbacs, director of Vaneck’s digital assets strategy, tweeted, “Institutions want a bitcoin ETF. His company recently filed a proposal with the SEC for a bitcoin ETF.
Gurbacs opined, “I believe a bitcoin ETF can bring many structural benefits to both bitcoin and traditional financial markets.” Contrary to the opinion of JP Morgan’s analysts, Vaneck’s CEO wrote, “The approval of a bitcoin ETF would be positive for bitcoin in both the short and long term.”
Do you think the SEC approving a bitcoin ETF this year is okay with bitcoin? Let us know in the comments below.
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