Banking giant JPMorgan has issued a significant warning regarding Bitcoin ($BTC), highlighting that the demand for spot exchange-traded funds (ETFs) linked to the second-largest cryptocurrency might be overestimated.
The bank pointed out that not all of the inflows represent new money from institutional investors. Instead, there has been a notable rotation away from cryptocurrency wallets on exchanges.
Bitcoin ETFs have become the preferred instrument for exposure to $BTC due to cost-effectiveness, regulatory protection, and deeper liquidity. Following the debut of spot ETFs, exchanges saw a substantial drop in Bitcoin reserves.
JPMorgan revealed that the majority of the $25 billion ETF inflows recorded since January represent a shift from existing digital wallets. This has challenged the bullish narrative of significant institutional demand.
The bank estimated that the actual net flows into Bitcoin ETFs are around $12 billion.
Additionally, JPMorgan noted that Bitcoin prices are currently high relative to production costs, leading them to anticipate minimal inflows in the coming months.
On Thursday, Bitcoin ETFs experienced $226 million in outflows. Bitcoin’s price was impacted by these movements as it remained below its $67,000 price level.
At the time of press, $BTC was struggling at $66,945, down by almost 6% weekly.
Analyst responses
Noting that there was nothing new, prominent analyst, James Seyffart, commented on JPMorgan’s assessment. He noted that it has been widely accepted that some inflows are recycled Bitcoin.
“To be fair, this broad assessment has been accepted and known virtually since the day they launched”, he stated.
Seyffart also questioned the accuracy of JPMorgan’s numbers, suggesting that the portion of recycled coins might be too high.
Adding to the discussion, senior ETF analyst at Bloomberg, Eric Balchunas, commented on Twitter, “JP’s 12b net flow into ETFs vs $25b total flow is prob a pretty good guess. Not all of that $25b is recycled but a good chunk is, which isn’t necessarily a bad thing, shows these ETFs have quickly become a great centralised way to own btc”.
Balchunas’s insights support the idea that a significant portion of ETF inflows are from existing holdings rather than new investments.
Recent movements in the ETFs
US spot Bitcoin ETFs recently experienced a net outflow of $226 million, led by Fidelity’s FBTC, which saw its second-largest net outflow day with $106 million leaving the fund, according to SoSoValue data.
Grayscale’s GBTC also faced significant outflows, with a total of $62 million withdrawn. Ark Invest and 21Shares’ ARKB saw $53 million in outflows, while Bitwise and VanEck each reported approximately $10 million in net outflows. Invesco and Galaxy Digital’s BTCO had $3 million in net outflows.
In contrast, BlackRock’s IBIT, the largest spot Bitcoin fund by net asset value, was the only fund to report a net inflow, attracting $18 million on Thursday.
Since their listing in January, 11 spot Bitcoin ETFs in the US have accumulated a total of $15.30 billion in net inflows.
Despite the significant outflows, these funds have generally received considerable investor interest since their inception.
Bernstein recently also issued a positive outlook on the coin, predicting that it could reach $1 million by 2033 and $200,000 by 2025.
This forecast came as the firm initiated coverage of software developer MicroStrategy, the largest corporate owner of Bitcoin, with an outperform rating.
MicroStrategy has transformed from a small software company to a major Bitcoin holder, now owning 1.1% of the global Bitcoin supply, worth about $14.5 billion, highlighted Bernstein.
The firm’s founder and chairman, Michael Saylor, has positioned MicroStrategy as a leading Bitcoin company, attracting substantial capital for an active Bitcoin acquisition strategy.
