JPMorgan analysts have reported that the Grayscale Bitcoin Trust (GBTC) could experience outflows of at least $2.7 billion if it is converted into a spot Bitcoin exchange-traded fund (ETF).
The report from JPMorgan suggests that traders have been buying GBTC shares at a discount, likely aiming to profit by cashing out the holdings if the trust converts to an ETF and the share price rises to match its Bitcoin assets.
JPMorgan’s Report on GBTC’s Potential Outflow
After the calculation of the GBTC inflows since 2023, the analysts came to the conclusion that the Grayscale Bitcoin Trust to ETF conversion could result in outflows upwards of $2.7 billion as investors sell off shares.
The JPMorgan analysts team, led by Global Market Strategy Managing Director Nikolaos Panigirtzoglou, explained their methodology, stating, “To proxy the buying flow into [the Grayscale Bitcoin Trust] since the beginning of the year, we cumulate the daily signed dollar volume, i.e., the daily volume in thousands of shares times the price times the sign of the price change, positive if the price had increased over that day and negative if the price had decreased.”
“This methodology produces an estimate of around $2.5 billion for the net cumulative flow into [the Grayscale Bitcoin Trust] since the beginning of the year. This number increases to close to $2.7 billion if one also adds the covering of the short interest since the beginning of the year,” said the analysts.
In addition, the analysts’ estimated $2.7 billion is the bare minimum outflow, and it could be “significantly more” unless GBTC’s current fee of 200 basis points is lowered to around 50 basis points.
“Once the SEC approves spot bitcoin ETFs in the U.S., we envisage a more intense competition with the average fee for bitcoin ETFs converging towards that of Gold ETFs, which currently stands at around 50 basis points,” said the JPMorgan analysts.
GBTC is currently trading at $30.45, up by 27% from a month ago, according to Yahoo Finance.
Incoming Competition of Management Fees
To give some context, Cathie Wood’s ARK Investment Management and 21Shares recently filed an update for their spot Bitcoin ETF application (ARKB), adjusting the management fee from 70 basis points to 80.
Bloomberg Intelligence ETF Analyst James Seyffart initially assumed that the fee of ARKB would be lower and “closer to 50 basis points,” which would be around the average of 54 basis points (0.54%) across US-listed ETFs.
“Also the fact that Ark and 21Shares have updated their filing from a 70 basis point fee to 80 basis points might mean that running these products is going to cost even more than some sponsors and issuers thought it would,” said Seyffart.
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