The recent surge in Grayscale Bitcoin Trust (GBTC) shares, which have climbed over 25% in the past month to $30.45, is primarily attributed to the U.S. Securities and Exchange Commission’s (SEC) decision not to appeal the August verdict from the D.C. Circuit Court of Appeals. This decision, made in early November, has reignited interest in GBTC, especially as the SEC reconsiders its previous rejection of Grayscale’s application to convert its trust into an exchange-traded fund (ETF).
Despite the SEC’s ongoing discussions on other spot ETF applications, there’s still a possibility that Grayscale’s proposal could face another rejection. However, the anticipation of GBTC converting to a spot bitcoin ETF has prompted investors to capitalize on the trust’s 10% discount relative to the value of its bitcoin holdings, contributing to its strong performance this year.
JPMorgan’s Insights: How $2.7 Billion Inflow Signals Market Trends?
Interestingly, JPMorgan analysts predict that GBTC traders will likely cash out following its potential ETF conversion. They estimate that about $2.7 billion worth of GBTC shares could be sold based on inflows since 2023.
This significant influx into GBTC since the start of the year, mainly driven by ETF conversion speculations, could threaten the market. Analysts led by Nikolaos Panigirtzoglou at JPMorgan have highlighted that if this $2.7 billion is withdrawn upon conversion, it could lead to a considerable outflow, potentially impacting Bitcoin’s price. However, these funds might migrate to new Bitcoin ETFs, possibly mitigating the effect on Bitcoin’s value and reshaping the landscape of Bitcoin funds.
Despite the potential for some of these funds to remain in Bitcoin, the risk of price declines remains due to the substantial amount possibly exiting the Bitcoin space.
JPMorgan also shines a positive light on Binance’s recent settlement with U.S. regulatory agencies, viewing it as a step towards a more regulated cryptocurrency environment, which could attract traditional investors.
In related developments, the ARK 21Shares Bitcoin ETF application has set its cost at 80 basis points. This could pressure Grayscale Bitcoin Trust to reduce costs to prevent more severe withdrawals and maintain its position as the largest and most liquid Bitcoin fund. Over time, investors are expected to gravitate towards ETFs that offer both cost efficiency and high liquidity.
