Crypto enthusiasts eagerly await the approval of a spot bitcoin exchange-traded fund in the United States, but JP Morgan says the approval won't impact the crypto market as much as many expect.
JP Morgan strategists, led by Nikolaos Panigirtzoglou, wrote in a report on Thursday that the possibility of the SEC (Securities and Exchange Commission) approving a physically-backed Bitcoin ETF could fundamentally disrupt the cryptocurrency market. It is unlikely that it will change. Several factors have led JP Morgan to question its impact.
First, spot Bitcoin ETFs have been around for a while in Canada and Europe but have failed to attract significant investor interest. The outflow of money from gold ETFs over the past year or so has not benefited bitcoin funds as a whole, including futures ETFs, analysts said.
Spot Bitcoin ETF Benefits Are 'Very Minimal'
Analysts at JP Morgan say spot bitcoin ETFs have some advantages over futures bitcoin ETFs, but the advantages are "very marginal." The Spot Bitcoin ETF offers a potentially more secure method of direct access to the world's first and largest digital assets. This removes the complexity associated with storing and transferring cryptocurrencies while also reducing the potential risks associated with his futures-based ETFs. Fundamental risk is the deviation between the value of an investment and its underlying benchmark.
Spot Bitcoin ETFs could also better match real-time supply and demand, leading to increased liquidity and greater price transparency, analysts said. However, with the launch of the spot bitcoin ETF, trading activity and liquidity may move away from the US bitcoin futures market “as the spot bitcoin ETF replaces futures-based bitcoin ETFs,” analysts said.
A new race is underway for Bitcoin ETF positions. Traditional financial giants such as BlackRock and Fidelity are trying to gain access to the crypto market.
The SEC has rejected all spot Bitcoin ETFs in the past. This time around, the SEC is expected to resolve one of its biggest concerns so far, as ETF applicants are eyeing plans to forge "monitor-sharing agreements" with exchanges like Coinbase. There is widespread optimism that the SEC may grant approval.
