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JPMorgan Is Bitcoin Skeptic by Day, ETF Investor by Night

Published June 14, 2024 12:09 PM
Giuseppe Ciccomascolo
Published June 14, 2024 12:09 PM

Key Takeaways

  • JPMorgan analysts fear cryptocurrencies are overpriced and have warned investors to pour money into them.
  • Despite this, the inflows in Bitcoin exchange-traded funds (ETFs) have notably increased recently.
  • However, JPMorgan also revealed investments in several Bitcoin ETFs.

While the crypto market sees a surge in investments, fueled by new Bitcoin exchange-traded funds (ETFs), JPMorgan analysts express skepticism about the future of these ETFs.

At the same time, however the Wall Street giant has invested in Bitcoin ETFs. Is it a friend or foe of cryptocurrencies?

JPMorgan Says Bitcoin Price Is Too High

Wall Street giant JPMorgan is throwing cold water on the future of Bitcoin ETFs. Their analysts believe the demand for these ETFs, which mirror Bitcoin’s price, is significantly inflated.

JPMorgan’s skepticism stems from two key concerns. Firstly, they point to the high cost of producing Bitcoin compared to its current price. This raises questions about Bitcoin’s long-term sustainability. Secondly, the recent rise in Bitcoin ETFs might not reflect a surge in new investment.

Instead, it could be existing investors to shift their Bitcoin holdings from exchange wallets to ETFs, motivated by factors like lower costs, better regulation, and the increased liquidity offered by ETFs.

According to the analysts, led by Nikolaos Panigirtzoglou, this theory is supported by the significant drop in Bitcoin reserves on exchanges observed by JPMorgan after the launch of spot ETFs.

Investors Prefer ETFs

The cryptocurrency market is experiencing a surge in investments this year, driven in large part by the launch of spot Bitcoin ETFs. These ETFs, which directly track Bitcoin’s price, have attracted a whopping $16 billion in inflows so far. When combined with activity in CME Bitcoin futures and investments by crypto venture capital funds, total inflows into the crypto market reach an impressive $25 billion year-to-date.

However, a cloud hangs over this seemingly positive trend. Analysts are questioning whether this influx represents a true wave of new money entering the market.

Evidence suggests a significant portion of these inflows might be existing investors changing their investment strategies. The convenience, lower costs, and regulatory benefits of spot Bitcoin ETFs compared to holding Bitcoin directly on exchanges seem to be driving this shift. Data from CryptoQuant  reveals a significant drop in Bitcoin reserves on exchanges – a decrease of 220,000 BTC (roughly $13 billion) since the launch of ETFs in January.

Factoring in this shift, analysts estimate that net new money entering the crypto market is actually closer to $12 billion year-to-date.

While the current trend points towards potential annual net inflows of $26 billion, analysts remain cautious. JPMorgan, in particular, expresses skepticism about the $12 billion pace continuing throughout the year. They point to the current high price of Bitcoin relative to its production cost, raising concerns about the long-term sustainability of this investment surge.

JPM Invests In BTC

Despite these concerns, is relevant to highlight that JPMorgan itself revealed investments in several Bitcoin ETFs in a recent SEC filing . This marks a notable shift for the bank, which constantly expresses skepticism towards cryptocurrency.

The filing, dated May 10, states that JPMorgan Chase holds a combined total of roughly $760,000 in shares across five Bitcoin ETFs: ProShares BITO, BlackRock’s IBIT, Fidelity’s FBTC, Grayscale Bitcoin Trust (GBTC), and Bitwise Bitcoin ETF. Additionally, the bank invested approximately $47,000 in Bitcoin Depot, a company providing cryptocurrency ATMs.

This move by JPMorgan Chase follows similar actions by other major financial institutions. Wells Fargo also disclosed holdings in Grayscale and ProShares Bitcoin ETFs, along with Bitcoin Depot. Susquehanna International Group previously announced significant investments in spot crypto ETFs earlier in the year.

While the total investment amount is modest compared to JPMorgan Chase’s massive asset base of $2.6 trillion, it signals a growing interest in Bitcoin and cryptocurrency among traditional financial players.

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