JPMorgan: Spot Bitcoin ETFs Won’t Live Up to the Hype; Here’s Why

Published by

Sohrab Khawas

July 7, 2023

In a research report conducted by JPMorgan, it has been indicated that the approval of a spot bitcoin exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC) is unlikely to have a significant impact on the crypto markets. While the SEC has not yet approved a spot bitcoin ETF, recent filings have addressed previous concerns, generating increased optimism for its approval.

Read on to know more.

Bitcoin ETFs: No Takers?

The report highlights that spot bitcoin ETFs have been available in Canada and Europe for some time but have struggled to attract substantial investor interest. However, BlackRock’s unit recently filed paperwork for a spot Bitcoin ETF, sparking interest from other asset managers to follow suit.

Despite the potential advantages of physically backed bitcoin ETFs over futures-based funds, the report suggests that the differences are relatively minor. Spot ETFs offer a more direct and secure method for exposure to Bitcoin, eliminating complexities related to custody, transfer, and basis risk associated with futures-based products.

If approved, spot ETFs are expected to provide real-time supply and demand reflection, enhancing liquidity and price transparency in spot bitcoin markets. However, the report notes that bitcoin funds, including futures-based and physically backed funds, have seen limited investor interest since Q2 2021, failing to benefit from outflows from gold ETFs in the past year.

JPMorgan’s Analysis

In summary, JPMorgan’s analysis suggests that while the approval of a spot bitcoin ETF by the SEC is anticipated, it is unlikely to be a game changer for the crypto markets due to historical investor behavior and limited interest in bitcoin funds.

JPMorgan suggests that if spot bitcoin ETFs are introduced, there is a possibility of trading activity and liquidity shifting away from U.S. bitcoin futures markets. The bank believes that this potential migration could occur if spot bitcoin ETFs replace futures-based bitcoin ETFs.

Sohrab Khawas

Sohrab is a passionate cryptocurrency news writer with over five years of experience covering the industry. He keeps a keen interest in blockchain technology and its potential to revolutionize finance. Whether he's trading or writing, Sohrab always keeps his finger on the pulse of the crypto world, using his expertise to deliver informative and engaging articles that educate and inspire. When he's not analyzing the markets, Sohrab indulges in his hobbies of graphic design, minimal design or listening to his favorite hip-hop tunes.