Amidst the frenzy surrounding the world’s largest fund managers and their pursuit of a spot Bitcoin ETF, JPMorgan maintains a stance of skepticism. The financial services giant argues that even if the spot Bitcoin ETF receives approval, its impact on the market will be limited in terms of bringing about substantial transformation.
The likes of Blackrock, Invesco, WisdomTree, Valkyrie and Fidelity Investments have all filed applications for a spot bitcoin ETF with the SEC. Though their initial applications were deemed to contain inadequacies by the regulatory watchdog, all fund managers have now addressed the concerns and refiled, indicating their commitment to achieving the first spot bitcoin ETF.
Many believe that it will be a game changer in the space because it will provide an avenue for investors to gain exposure to bitcoin through a regulated entity without the risks of self custody, but JPMorgan through a recent report revealed that they believe otherwise.
The reason for their negative sentiment is the existence of spot bitcoin ETFs in other jurisdictions, including Canada and Europe.
“Spot bitcoin ETFs existed for some time outside the U.S., in Canada and Europe, but have failed to attract large investor interest” they wrote in the report.
The report however agreed that the industry can benefit greatly from the injection of liquidity from US investors should the spot ETF be approved. It further emphasised that a spot bitcoin ETF will bring about more transparency in price than its futures counterpart.
“Spot ETFs are more likely than futures based ETFs to reflect real time supply and demand and their approval in the U.S. would bring more liquidity and enhance price transparency in spot bitcoin markets,”
While the search for the first spot Bitcoin ETF is still on, the US SEC have approved applications for futures bitcoin ETF from Proshares (BITO), Valkyrie (BTF) VanEck (XBTF) and Teucrium. It also approved the first leveraged futures ETF in Volatility Shares 2x Bitcoin Strategy ETF (BITX) last month.
JPMorgan’s report further attributed its lack of optimism to the failure of bitcoin to benefit from gold outflow and its difficulty in winning new investors since the 2021 bull market.
“Bitcoin funds overall, including futures based and physically backed funds, have attracted little investor interest since Q2 2021, also failing to benefit from investor outflows from gold ETFs over the past year or so”
Despite JPMorgan’s pessimism, there are already early signs of the potential impact of a spot bitcoin ETF as is evident in the $125 million inflow recorded by digital asset investments this week.
