- The SEC’s approval of spot bitcoin ETFs may see $3-13 billion inflows from existing crypto products like GBTC and futures ETFs, but is unlikely to attract significant fresh capital from outside crypto
- GBTC may face $13 billion in outflows given its higher fees compared to the new spot ETFs, potentially losing assets and liquidity advantages if it does not lower fees
- Retail investors prefer the spot ETFs for lower fees while institutions may shift from GBTC and futures ETFs, but overall the spot ETFs may not spur major new crypto investments
The Securities and Exchange Commission recently approved several spot bitcoin exchange-traded funds (ETFs), marking a historic move. However, JPMorgan analysts believe these new ETFs may not draw significant fresh capital inflows.
Inflows Projected from Existing Crypto Products
The analysts estimate around $3 billion could come from existing bitcoin futures-based ETFs. Grayscale’s Bitcoin Trust (GBTC) could see $3-13 billion exit into the new spot ETFs. Additionally, $15-20 billion may transition from retail crypto exchange accounts and wallets into the spot ETFs.
However, the analysts remain skeptical that the spot ETFs will attract large new investments into crypto from outside the ecosystem. They believe crypto adoption will depend more on future regulations allowing crypto to integrate with traditional finance.
Potential Outflows from Grayscale’s Bitcoin Trust
Given its high fees compared to the spot ETFs, GBTC may see up to $13 billion in outflows. Speculators may take profits after buying discounted GBTC shares anticipating elimination of the discount upon conversion.
If GBTC does not lower its fees to compete, it could lose assets and liquidity advantages from being the largest bitcoin fund. This may induce further outflows from institutional investors.
Retail Versus Institutional Preferences
Overall, retail investors likely favor the new spot ETFs for their lower fees and accessibility. Institutional investors may shift from futures ETFs and GBTC into the cheaper spot ETFs if GBTC does not reduce fees.