Despite the buzz around a possible U.S. Securities and Exchange Commission (SEC) approval of a spot bitcoin exchange-traded fund (ETF), banking giant JPMorgan has doused the high spirits, expressing doubt in a recent research report on the game-changing potential of such a move.
Limited influence despite renewed optimism
While anticipation grows with asset managers like BlackRock, Invesco, and Wisdom Tree lining up their applications, JPMorgan analysts, led by Nikolaos Panigirtzoglou, argue that the approval of a spot bitcoin ETF may not significantly shift the crypto markets. This viewpoint is premised on the need for more investor interest in bitcoin funds overall, including futures-based and physically-backed funds, which have seen little attraction since Q2 2021, despite outflows from gold ETFs.
“Spot bitcoin ETFs have existed for some time outside the U.S., in Canada and Europe, but have failed to attract large investor interest,” the report detailed. The belief is that while a spot ETF offers a more direct, secure route to bitcoin exposure, bypassing complexities around direct BTC custody and futures-based product risks, the advantages are marginal.
Future outlook: Spot vs. Futures-based Bitcoin ETFs
However, the report does not entirely dismiss the potential influence of the spot bitcoin ETFs. The bank’s analysts foresee a potential shift in trading activity and liquidity from U.S. bitcoin futures markets, particularly if spot bitcoin ETFs start to replace futures-based bitcoin ETFs. “Spot ETFs are more likely than futures-based ETFs to reflect real-time supply and demand, and their approval in the U.S. would bring more liquidity and enhance price transparency in spot bitcoin markets,” the report read.
The predictions contrast with the optimism shown by industry players. For instance, Paul Grewal, Coinbase’s Chief Legal Officer, pointed out that there’s a strong public desire for safe, regulated crypto products, and a spot Bitcoin ETF approval would fulfill this desire.
Ultimately, the potential impact of the SEC’s decision remains speculative as the crypto world eagerly awaits the regulator’s green light. Despite the forecasted minimal impact by JPMorgan, the approval of spot bitcoin ETFs could still signify a crucial milestone for the industry, acknowledging the evolution and maturation of the cryptocurrency market.
