Major Warning on Bitcoin: JP Morgan Highlights Overestimated Demand for Spot ETFs
JP Morgan has issued a significant warning regarding Bitcoin, pointing out that the demand for spot exchange-traded funds (ETFs) linked to the second-largest cryptocurrency is highly overestimated. The bank noted that not all inflows into these funds represent new money from institutional investors. In reality, there has been a substantial shift away from crypto wallets on exchanges.
Factors such as cost-effectiveness, regulatory protection, and deeper liquidity have made Bitcoin ETFs a preferred tool for gaining exposure to Bitcoin. Notably, exchanges have seen a significant drop in Bitcoin reserves following the debut of spot ETFs.
The bank highlighted that the majority of the $25 billion inflows into Bitcoin ETFs since they began trading in January actually represent a rotation from existing digital wallets, a major blow to the bullish narrative of substantial institutional demand. JP Morgan estimated that the net actual inflows into Bitcoin ETFs are around $12 billion.
Moreover, JP Morgan pointed out that Bitcoin prices are high compared to the production cost of the leading cryptocurrency, which is why the bank does not expect substantial inflows in the coming months. Bitcoin ETFs have witnessed outflows amounting to $244 million, and the largest cryptocurrency remains below the $67,000 level.
Prominent analyst James Seyffart noted that it has long been known that some of the inflows merely represent recycled Bitcoin. He stated, “To be fair, this broad assessment has been widely accepted and known practically since the day of its launch.” Seyffart also questioned the accuracy of JP Morgan’s figures, given the seemingly high proportion of recycled coins.
Eric Balchunas, Senior ETF Analyst at Bloomberg, predicted that JP Morgan’s attacks on ETFs would not age well. He commented on social media, “They have not been thought leaders here. Ultimately, any calls betting against ETFs (regardless of the category) probably won’t age well.”
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