JPMorgan in a recent research study highlighted that the approval of a spot Bitcoin ETF by the SEC is unlikely to have a major impact on cryptocurrency markets. The study suggests that the ETF approval would not bring significant changes to the market dynamics. Similar ETFs have operated in Canada and Europe without generating a significant amount of investor interest, the researchers noted.
Multiple applications for a spot Bitcoin ETF have alleviated earlier concerns, leading to increased optimism for approval. The SEC’s worries seem to have been addressed in subsequent filings. A division of BlackRock has filed paperwork for a spot in Bitcoin ETF, inspiring other asset managers to follow suit. Invesco and Wisdom Tree are among the firms that have applied or renewed their applications.
Current spot Bitcoin ETFs outside of the United States have failed to attract considerable investor interest, according to JPMorgan analysts led by Nikolaos Panigirtzoglou. Despite outflows from gold ETFs, interest in Bitcoin funds has been modest since the second quarter of 2021. This includes both futures-based and physically backed assets.
JPMorgan Analysis: Spot Bitcoin ETFs and Potential Market Impact
Although the analysis emphasized that these advantages are rather minor, physical-based Bitcoin ETFs do have some advantages versus future-based funds. Spot ETFs provide a direct and secure method to invest in Bitcoin. They eliminate complexities of custody, transfer, and basis risk associated with futures-based products.
If the US approves spot ETFs, they are expected to reflect real-time supply and demand dynamics. This would enhance liquidity and price transparency in spot Bitcoin markets. This could be able to solve some of the problems that the current cryptocurrency investment vehicles have.
While the SEC’s likely approval of a spot Bitcoin ETF is anticipated, JPMorgan’s research analysis suggests it might not significantly impact the cryptocurrency market. The introduction of ETFs would offer investors a secure and direct path to Bitcoin. This would improve liquidity and pricing transparency in the spot market.