BitcoinBTC, ethereum and other major cryptocurrencies solana and XRPXRP have suffered a huge crash—just after JPMorgan’s CEO issued a wild warning that Satoshi Nakamoto could “erase” bitcoin entirely.
The bitcoin price crashed back toward $40,000 per bitcoin despite BlackRock’sBLK legendary chief executive revealing a massive crypto plan is already in the works and the launch of its spot bitcoin exchange-traded fund (ETF) was just “step one”.
Now, as the market braces for an Elon Musk bombshell, bitcoin and crypto traders are nervously eyeing outflows from Grayscale’s bitcoin trust (GBTC), freshly converted into a fully-fledged spot bitcoin ETF—with JPMorgan warning $1.5 billion could still be yanked from the fund in coming weeks.
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“If the previous $3 billion estimate proves correct and given $1.5 billion has exited already, then there could be an additional $1.5 billion still to exit the bitcoin space via profit-taking on GBTC, thus putting further pressure on bitcoin prices over the coming weeks,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a note seen by The Block.
The value of Grayscale’s GBTC has rocketed along with rising expectations it would be granted full spot bitcoin ETF status by the U.S. Securities and Exchange Commission (SEC) in recent months.
Those that have bought into GBTC over that last few years are now “taking full profit post-ETF conversion by exiting the bitcoin space entirely rather than shifting to cheaper spot bitcoin ETFs,” JPMorgan analysts said.
“Liquidity and market depth also matter, but again there is risk for GBTC on that front also if other spot bitcoin ETFs manage to reach critical mass in terms of size and liquidity,” the analysts wrote, finding GBTC could see a further $5 billion to $10 billion of outflows if it loses its liquidity advantage.
A fee war has broken out among spot bitcoin ETF issuers, with the likes of BlackRock and Fidelity offering rock-bottom fees for those who want to buy shares, driving demand for alternatives to Grayscale’s GBTC.
“At the time of conversion, GBTC held approximately 620,000 bitcoin, which has now reduced to roughly 552,000 bitcoin,” Matteo Greco, research analyst at investment company Fineqia International, said in emailed comments.
“The strong outflow can be attributed mainly to two factors: firstly, GBTC customers were restricted from redeeming shares and could only sell them on the secondary market due to the product’s structure, before the conversion. This compelled many customers to hold their positions for years without an exit option unless they were willing to sell at a significant discount in the secondary market. Secondly, the higher management fee set by Grayscale (1.5%) compared to most competitors (0.2%/0.3%) led some investors to withdraw their investment from Grayscale, either to cash in profits or reinvest in more cost-effective ETFs.”
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However, despite the wild swings hitting the bitcoin price and the weighing on the price of other major cryptocurrencies ethereum, XRP and solana, many working in the crypto space remain upbeat.
“While the short-term impact [of the spot bitcoin ETF approval] is unclear and may cause volatility over the medium term, my personal view is that the increased access for retail investors, and alignment from institutions to adopt and promote a new asset class, is certainly positive,” Jason Lau, chief innovation officer at the OKX exchange, said in emailed comments.
“I believe that the widespread acceptance of bitcoin will ultimately drive more users to interact with bitcoin itself and benefit from the power of a decentralized permissionless network.”
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