Why would the approval of a US Bitcoin ETF send the cryptocurrency plunging in the near future?
The introduction of Bitcoin Exchange Traded Fund in the US is more likely to attract investors out of renowned buying options and create a drag on the token’s price, says JP Morgan on Friday.
Once the Biden administration begins to rule the country, the Securities & Exchange Commission will approve such an ETF in 2021. Regulatory authorization will reinforce bitcoin’s investment in the long term. According to JPMorgan, this approval would sap investor capital from the Grayscale Bitcoin Trust (GBTC).
Retail investors buy Bitcoin directly, while the institutional investors buy stakes in Grayscale’s trust for regulatory reasons, as per the strategists. The fund holds a monopoly on institutional capital flowing into bitcoin and hence, boasts a large premium to the cryptocurrency its traces.
The team states that, a Bitcoin ETF will offer an alternative to the Grayscale trust and divide them into the premiums that funds pay. The bank exclaimed in a note to all its clients saying that,
“A cascade of GBTC outflows and a collapse of its premium would likely have negative near-term implications for bitcoin given the flow and signaling important of GBTC”.
