JP Morgan Says BTC ETF Approval May Not Impact the Market

• JP Morgan analysts do not think Bitcoin Exchange-Traded Fund approval can cause any huge revolution in the crypto industry.

• According to them, the Bitcoin ETF approval in Canada failed to attract several large institutional Investors. 

The US Securities and Exchange Commission is yet to approve its first Bitcoin Exchange-Traded Fund (ETF) after turning down applications from several firms including Grayscale, Ark Invest, etc. However, industry key players are very optimistic that things could change with BlackRock’s Bitcoin ETF application, and could redefine the entire ecosystem.

Out of the 576 ETF applications filed by BlackRock, SEC has approved 575 and rejected only one. This puts the odds in their favor. Interestingly, JP Morgan has played down predictions that ETF approval could cause a massive revolution in the crypto market. 

On February 18, 2021, the world’s first Bitcoin ETF was approved by the Ontario Securities Commission (OSC). JP Morgan analysts led by Nikolaos Panigirtzoglou wrote in a report that this groundbreaking move failed to attract institutional investors to the ecosystem, hence, SEC’s approval would not be any different.

Spot bitcoin ETFs [have]existed for some time outside the U.S., in Canada and Europe, but have failed to attract large investor interest…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.

JP Morgan, however, recognizes the possibility of BlackRock getting approval considering the fact that they have addressed some of the previous concerns. Fidelity Investments has also refiled an ETF application.

JP Morgan Explains Bitcoin ETF and Future ETF, SEC Response on BlackRock’s ETF

Recently, SEC informed the exchanges including Nasdaq and Cboe Global Markets that applied on behalf of these companies that their applications lack clarity, hence, are insufficient. Sui Chung, chief executive of CF Benchmarks, explained that SEC needs more descriptive details around the proposed provision to make a judgment. 

Speaking on the physically-backed Bitcoin ETFs and Futures-based funds, JP Morgan explained that the advantages of the former over the other are marginal. Spot ETF is said to offer a more direct and secure way to gain exposure to Bitcoin. The report also disclosed that spot ETF could cause the movement of trading activity and liquidity from the country’s Bitcoin futures market. Specifically, spot Bitcoin ETFs may replace futures-based ETFs. 

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.

In 2021, Senior Bloomberg ETF analyst Eric Balchunas stated that Bitcoin ETFs would just be a minor catalyst while a physically-backed ETF would be a major catalyst to the industry’s revolution. He observed that a lot of investors and advisors do not like derivatives.

Some other reports also suggest that the Bitcoin ETF may have minimal impact since most investors have already gained crypto exposure through other products or hold the assets directly. Over the years, Grayscale Bitcoin Trust (GBTC) for instance, has been able to give crypto exposure to institutional investors. 

Regardless, the Bitcoin price may record a massive gain when the first ETF gets approval. Bitcoin was trading at $30,286.53 as of press time. 

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