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Banking giant JPMorgan recently issued a major Bitcoin warning, stating that the demand for spot-based exchange-traded funds that are tied to the second-largest cryptocurrency is significantly overestimated.
JPMorgan has pointed to the fact that not all of the inflows actually represent fresh money from institutional investors. In reality, there has been a substantial rotation away from cryptocurrency wallets on exchanges.
Due to such factors as cost effectiveness, regulatory protection, and deeper liquidity, Bitcoin ETFs have now emerged as the preferred instrument for getting Bitcoin exposure.
Notably, exchanges experienced a substantial drop in Bitcoin reserves following the debut of spot ETFs.
JPMorgan has stated that the majority of the $25 billion worth of ETF inflows recorded since the start of their trading in January actually represent a rotation from existing digital wallets in a major blow to the dominant bullish narrative about significant institutional demand.
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The banking giant has estimated that the actual net flows into Bitcoin ETFs stand at roughly $12 billion.
On top of that, JPMorgan has noted that Bitcoin prices are high relative to the production cost of the leading cryptocurrency, which is why the banking giant does not anticipate substantial inflows in the coming months.
On Thursday, Bitcoin ETFs saw $244 million worth of outflows. The largest cryptocurrency remains below the $67,000 level.
Nothing new
As noted by prominent analyst James Seyffart, it has long been known that some of the inflows simply represent recycled Bitcoin. “To be fair. This broad assessment has been accepted and known virtually since the day they launched,” he said. Seyffart has also questioned the accuracy of JPMorgan’s numbers since the portion of recycled coins appears to be too high.
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Eric Balchunas, Bloomberg’s senior ETF analyst, has predicted that JPMorgan’s anti-ETF takes will not age well. “They haven’t exactly been thought leaders here. In the end tho any calls that bet against the ETF (regardless of category) probably won’t age well,” Balchunas said in a social media post.
