JPMorgan Expects $36 Billion Inflows to Spot Bitcoin ETFs But Not From Where You Think

Analysts at popular U.S. bank JPMorgan expect newly launched spot Bitcoin ETFs to attract capital from existing crypto funds and investors.

Following the widely anticipated launch of spot Bitcoin ETFs in the United States, the cryptocurrency market has witnessed a significant correction. The broad optimism that surrounded the launch of the products and the anticipated huge institutional inflow has not materialized.

It is noteworthy that the current state of the market follows a prediction by JPMorgan analysts after ETFs went live in the past week. In a note sent to clients, lead analyst Nikolaos Panigirtzoglou argued that spot Bitcoin ETFs would attract inflows of as much as $36 billion in the weeks following their debut.

Not Fresh Capital

Contrary to popular opinion, the JP Morgan analysts kicked against the notion that the ETFs would see a “lot of fresh capital.” Instead, they projected that the $36 billion would largely come from existing crypto funds such as Grayscale’s popular GBTC product, which also converted into an ETF in a watershed moment for the digital asset industry.

True to the prediction, publicly available data shows outflows of over $579 million from Grayscale’s GBTC as investors leave the fund for products that offer relatively lower management fees. Others may also have exited GBTC to book profits, having gained Bitcoin exposure at a discounted rate prior to the fund’s conversion to an ETF.

With Grayscale pegging its management fee at 1.5% per annum, JPMorgan analysts warn that the fund could see significant outflows (between $5 billion to $10 billion) unless it lowers fees to new industry standards. Most newly launched spot Bitcoin ETFs offer management fees between 0.2-0.4%, a significantly lower option than Grayscale’s.

Meanwhile, JPMorgan analysts also expect that existing crypto investors may opt to gain exposure to BTC through ETFs rather than traditional crypto exchanges. Hence, they predict that around $20 billion will also flow from exchanges to the newly launched, bringing the projected inflow to spot Bitcoin ETFs closer to the predicted $36 billion range.