Bitcoin downside pressure limited as GBTC profit-taking mostly concluded: JPMorgan

The downward pressure on bitcoin's price has been curtailed as profit-taking on the Grayscale Bitcoin Trust (GBTC) has largely concluded, according to JPMorgan.

GBTC has witnessed $4.3 billion in outflows since its conversion to a spot bitcoin exchange-traded fund two weeks ago — surpassing JPMorgan's estimates of around $3 billion. Therefore, GBTC profit-taking has largely happened already, JPMorgan analysts, led by Nikolaos Panigirtzoglou, wrote in a note on Thursday.

"In turn, this would imply that most of the downward pressure on bitcoin from that channel should be largely behind us," the analysts said.

Bitcoin's price dropped more than 20% in the last two weeks following the approval of spot bitcoin ETFs in the U.S. The cashing in of profits by GBTC investors caused the decline in bitcoin's price, according to the analysts, but the worst appears to be over now. However, they cautioned that if GBTC's 1.5% fee isn't reduced soon, the fund could experience ongoing outflows and lose market share to rivals.

"There appear to be two emerging competitors to Grayscale's bitcoin ETF: Blackrock and Fidelity, which have so far attracted $1.9 billion and $1.8 billion of inflows respectively. They both have much lower fees of only 25 basis points (without waivers) vs 150 basis points for GBTC," the analysts said.

Spot bitcoin ETFs enhance BTC price discovery

The recent introduction of spot bitcoin ETFs in the U.S. adds a new layer to bitcoin price discovery, aligning it with traditional markets, especially in equities where ETFs are common, according to the analysts.

"While, at face value, the introduction of spot bitcoin ETFs implies more fragmentation, in practice it would increase market depth and liquidity if the experience of ETFs in traditional asset classes such as equities is a guide," the analysts said. "In other words, we expect that the emergence of spot bitcoin ETFs would make the bitcoin price discovery process more rather than less efficient."

Finally, GBTC's plan to introduce a covered call ETF, if approved, would be a boost for the fund as well as bitcoin's derivatives markets, the analysts concluded.