A research report conducted by JPMorgan pointed out that the US Securities and Exchange Commission (SEC)’s approval of a spot bitcoin exchange-traded fund (ETF) is unlikely to have a material impact on crypto markets. Although the SEC has yet to approve a spot bitcoin ETF, recent filings have allayed previous concerns, leading to increased optimism about its approval.
Read on to find out more.
Bitcoin ETFs: No buyers?
The report highlights that spot bitcoin ETFs have been available in Canada and Europe for some time, but are struggling to garner significant interest from investors. However, BlackRock’s division recently submitted the paperwork for a spot bitcoin ETF, which has sparked interest from other money managers to follow suit.
Despite the potential advantages of physically-backed Bitcoin ETFs over futures funds, the report suggests the differences are relatively small. Spot ETFs offer a more direct and secure method of gaining exposure to Bitcoin, eliminating the complexities associated with custody, transfer and basis risk associated with futures-based products.
Related: SEC Meets with BlackRock, Fidelity, and Others: Will Bitcoin ETF Approvals Go Through?
If approved, spot ETFs are expected to reflect real-time supply and demand, thereby improving liquidity and price transparency in the spot bitcoin markets. However, the report notes that Bitcoin funds, including futures-based and physically-backed funds, have experienced limited investor interest since Q2 2021 and have not benefited from outflows from gold ETFs over the past year.
Analysis by JPMorgan
In summary, JPMorgan’s analysis suggests that while the SEC is expected to approve a spot bitcoin ETF, it is unlikely to turn around for crypto markets given historical investor behavior and limited interest in bitcoin funds.
Read more: Spot Bitcoin ETFs Likely to Get SEC Green Light: Bernstein Report
JPMorgan notes that with the launch of spot bitcoin ETFs, there is a possibility that trading activity and liquidity could shift away from the US bitcoin futures markets. The bank posits that this potential migration could occur as spot bitcoin ETFs replace futures-based bitcoin ETFs.
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