JPMorgan Anticipates Substantial Capital Migration to Newly Launched Spot Bitcoin ETFs from Existing

New Spot Bitcoin ETFs Could Attract $36 Billion Inflows, J.P. Morgan Report States

Following the hesitant approval of spot bitcoin (BTC) ETFs by the U.S. Securities and Exchange Commission (SEC), the focus now turns to the potential capital inflows into these newly created ETFs, according to a Thursday research report by J.P. Morgan. While the market reaction has been relatively subdued, the report expresses skepticism about the widespread optimism regarding a surge in fresh capital entering the crypto space due to the ETF approval.

However, J.P. Morgan anticipates a significant shift of funds from existing crypto products to the newly established ETFs. Even if there is no influx of new capital into the cryptocurrency market, the report suggests that the new ETFs could attract inflows of up to $36 billion.

The bank projects that approximately $3 billion could exit the Grayscale Bitcoin Trust (GBTC) and move to the new spot ETFs. This movement is expected as investors take profits after acquiring discounted GBTC shares in the secondary market over the last year. Additionally, the report envisions up to $20 billion flowing from retail investors transitioning from digital wallets held at crypto exchanges to the new ETFs.

J.P. Morgan points out that Grayscale's relatively high fees might prompt outflows. Unless Grayscale adjusts its fees to align with competitors like Blackrock (BLK) and other providers, the bank suggests that an additional $5 billion to $10 billion could quickly exit GBTC, moving toward more cost-effective spot bitcoin ETFs.

The report also notes that institutional investors, holding their crypto in fund format, may shift from futures-based ETFs and GBTC to more economical spot ETFs, particularly if GBTC is slow to reduce its fees.