A recent research report by JP Morgan has highlighted a notable decrease in selling pressure on Bitcoin, the world’s largest cryptocurrency. According to the bank, this change is primarily due to the reduction of profit-taking activities in the Grayscale Bitcoin Trust (GBTC). Over the past few weeks, Bitcoin experienced a sharp decline, dropping over 20% following the introduction of spot bitcoin exchange-traded funds (ETFs) in the U.S. market. Analysts at JP Morgan attribute this market correction to investors who previously bought GBTC at a discount, opting to take profits.
GBTC before transitioning to an ETF, stood as a key investment product for U.S. investors seeking exposure to Bitcoin without directly purchasing the cryptocurrency. Currently managing assets over $20 billion, GBTC remains a significant player in the cryptocurrency investment landscape. JP Morgan’s analysis pointed out that the profit-taking from the ‘discount to net asset value’ (NAV) trade in GBTC has substantially concluded. This activity, involving an outflow of around $3 billion, had exerted downward pressure on Bitcoin’s price.
Shift in investment dynamics
The report further elaborates that approximately $4.3 billion has already been withdrawn from GBTC, signaling the end of major profit-taking activities. This deduction implies that the negative impact of these withdrawals on Bitcoin’s price is likely to be less pronounced going forward. Moreover, JP Morgan estimates that around $1.3 billion has been reallocated from GBTC to the newly established spot bitcoin ETFs, which offer lower costs. This shift represents a significant monthly outflow and is expected to continue, especially if Grayscale, the firm behind GBTC, does not reduce its fees.
The transition of investment from GBTC to these ETFs could accelerate further as competing spot ETFs grow in size and liquidity. Additionally, the report mentioned that the bankruptcy estate of crypto exchange FTX contributed to the selling pressure by offloading around $1 billion worth of GBTC since its conversion to an ETF.
Looking ahead: Bitcoin’s market outlook
As the market adapts to these shifts, JP Morgan’s insights suggest a potentially more stable period for Bitcoin. The bank’s analysis indicates that the bulk of the selling pressure due to profit-taking in GBTC has passed, which could lead to a more balanced market environment for Bitcoin. Investors and market analysts will continue to monitor these developments closely, particularly the interplay between GBTC and emerging spot bitcoin ETFs, to gauge the future trajectory of Bitcoin’s value.
