JPMorgan Raises Concerns Over Impending Bitcoin Sell-off

In a recent LinkedIn post, JPMorgan analyst Nikolaos Panigirtzoglou delves into the dynamics affecting Bitcoin’s price following the introduction of spot Bitcoin exchange-traded funds (ETFs) and outflows from Grayscale’s Bitcoin fund. The launch of spot Bitcoin ETFs saw a decline in Bitcoin’s value by over 10%, attributed to profit-taking behaviors and the “buy the rumor/sell the fact” phenomenon. Despite the anticipation leading Bitcoin to surpass $47K pre-approval, it dropped to $41,697 post-approval.

The conversion of Grayscale’s Bitcoin trust (GBTC) into a spot Bitcoin ETF, approved by the U.S. Securities and Exchange Commission (SEC) on Jan. 10, contributed to market shifts. Notably, a $1.5 billion outflow from Grayscale’s GBTC fund had a considerable impact, with investors opting to exit the Bitcoin space entirely instead of transitioning to more cost-effective spot Bitcoin ETFs.

LATEST: Despite $GBTC seeing a -$590m outflow gash friday, The Nine overwhelmed it w/ +$623m (3rd best day), $IBIT & $FBTC both >$200m while $BTCO & $HODL had their best hauls to date. TOT NET FLOWS stand at +$1.2b as Nine's aum hit $4b vs GBTC's -$2.8b, upping aum share to 14%. pic.twitter.com/nB57H8Ro8s

— Eric Balchunas (@EricBalchunas) January 20, 2024

JPMorgan’s analysis suggests a complex interplay of factors, including ETF launches and specific fund outflows, influencing the current Bitcoin landscape.

Highlighting his prior estimate that approximately $3 billion had entered Grayscale’s Bitcoin Trust (GBTC) through the secondary market in 2023 to capitalize on the discount to Net Asset Value (NAV), the JPMorgan analyst elaborated:

“If the earlier $3 billion estimate proves accurate, and considering that $1.5 billion has already exited, there may be an additional $1.5 billion poised to exit the Bitcoin space through profit-taking on GBTC. This potential exodus could exert further downward pressure on Bitcoin prices in the weeks ahead.”

Notably, Grayscale’s Bitcoin ETF has experienced an outflow of 50,106.59 BTC since Jan. 12, valued at over $2 billion.

Panigirtzoglou also delved into his assessment of other spot Bitcoin ETFs launched on Jan. 11, such as Blackrock’s Ishares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC).

“Excluding GBTC, the remaining spot Bitcoin ETFs attracted a substantial $3 billion inflow in just four days: Thursday 11th, Friday 12th, Tuesday 16th, and Wednesday 17th. This mirrors the inflows observed during previous Bitcoin product launches, such as the introduction of CME Bitcoin futures or futures-based Bitcoin ETFs,” the JPMorgan analyst observed.

He further noted: “As anticipated, a significant portion of this $3 billion influx represents a shift from existing Bitcoin vehicles, including futures-based Bitcoin ETFs, which have shown outflows of nearly $300 million since last Thursday. Additionally, retail investors seem to be transitioning from digital wallets with exchanges/retail brokers to more cost-effective spot Bitcoin ETFs.”