JPMorgan Voices Bitcoin ETF Skepticism

The banking giant believes holders will simply rotate funds into more legitimate products, with no new money coming in.

The bank is not expecting a wave of new money to flow into crypto.

Banking giant JPMorgan remains unconvinced of the bull case for bitcoin, a recent report from the institution reveals. The bank's analysts do not believe an ETF will prove attractive to new investors—and they're also skeptical about the Halving's effect.

Two Major Catalysts

There are two major reasons why a Bitcoin spot ETF could kick off a new phase of the crypto bull market.

The first is that it would open the way to a new wave of money that cannot easily invest in BTC any other way. Most institutions have their hands tied in terms of the regulated products they are able to access. Retail users have greater freedom, but many are unwilling to take a chance by sending money to an unregulated crypto exchange based in another jurisdiction. Potentially billions of dollar of new money stands to flow into BTC if a spot ETF is approved.

The second reason is that the SEC's approval of such an ETF gives the crypto sector a stamp of legitimacy, and provides a degree of much-needed regulatory clarity for the blockchain space.

Churning Capital

JPMorgan is unconvinced about the effect an ETF would have. Instead of seeing sidelined money come into the market, the bank instead believes that existing investors will simply move their money across to the new and better-structured products—for example, shifting cash from Grayscale's GBTC and futures contracts to ETFs. Neither do they have confidence that any regulatory clarity provided by approval would attract newcomers.

It's a fair position to take. After all, spot BTC ETFs have already been launched in Europa and Canada, and do not appear to have had much of an effect on the markets. As for the Halving—a keenly-awaited event in the crypto calendar that is generally understood to be a bullish catalyst—the bank thinks the effect is already priced in.

Pent-Up Demand

Against these opinions, there is strong anecdotal evidence that institutions are interested, and are just waiting for their opportunity. Additionally, gold may provide an interesting parallel, with demand surging following the approval of the first ETF in March 2003.

Following a long period of consolidation, gold soared in value following ETF approval, from $350 in 2003 to $1,900 in 2011.

Gold spot price chart (TradingView)
ETF approval appears to have been a catalyst for gold demand.

Finally, asset managers such as BlackRock are not in the habit of launching new products and leaving it at that. There is already good evidence that these institutions are preparing a major marketing campaign in anticipation of imminent approval. If there isn't demand already there, they will create it.

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