JPMorgan Warns of Incoming Bitcoin Selloff With Anticipated $3 Billion Grayscale Outflow

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Global investment bank JPMorgan has warned of additional outflow from Grayscale’s bitcoin fund, cautioning that it will put “further pressure on bitcoin prices over the coming weeks.” The bank’s analyst also explained that the $3 billion inflow into new spot bitcoin exchange-traded funds (ETFs) “reflects a rotation from existing bitcoin vehicles” or “from retail investors shifting from digital wallets held with exchanges/retail brokers to cheaper spot bitcoin ETFs.”

JPMorgan Warns of Looming Bitcoin Selloff

JPMorgan analyst Nikolaos Panigirtzoglou shared his bitcoin’s price outlook on Linkedin Friday, specifically the impact of spot bitcoin exchange-traded fund (ETF) launches and outflows from Grayscale’s bitcoin fund. Grayscale converted its bitcoin trust (GBTC) into a spot bitcoin ETF after the U.S. Securities and Exchange Commission (SEC) approved it along with 10 other funds on Jan. 10.

“The bitcoin price declined by more than 10% since the launch of spot bitcoin ETFs last week,” the JPMorgan analyst described. “It appears that profit taking, i.e. buy the rumor/sell the fact dynamics, took place in recent days as we had previously feared. The price of BTC rose past $47K in anticipation of the spot bitcoin ETF approval but dropped after the approval. At the time of writing, the cryptocurrency is trading at $41,697.

“The $1.5bn outflow from the Grayscale’s GBTC fund in particular has acted as a drag. It looks like GBTC investors who over the past year had been buying the GBTC fund at a significant discount to NAV to position for its eventual ETF conversion, have been taking full profit post ETF conversion by exiting the bitcoin space entirely rather than shifting to cheaper spot bitcoin ETFs,” Panigirtzoglou detailed.

Noting that he has previously estimated that up to $3 billion had been invested into GBTC in the secondary market during 2023 to take advantage of the discount to NAV, the JPMorgan analyst explained:

If the previous $3bn estimate proves correct and given $1.5bn has exited already then there could be an additional $1.5bn still to exit the bitcoin space via profit taking on GBTC thus putting further pressure on bitcoin prices over the coming weeks.

Cumulatively, Grayscale’s bitcoin ETF has seen an outflow of 50,106.59 BTC since Jan. 12, valued at over $2 billion.

Panigirtzoglou also shared his analysis of the other spot bitcoin ETFs that launched on Jan. 11, including Blackrock’s Ishares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC).

“Outside GBTC, the other spot bitcoin ETFs got a decent $3bn of inflow in only four days: Thursday 11th, Friday 12th, Tuesday 16th, and Wednesday 17th. This is comparable to the inflows seen during previous bitcoin product launches such as the launch of CME bitcoin futures or the launch of futures-based bitcoin ETFs,” the JPMorgan analyst noted, adding:

As expected most of this $3bn of inflow reflects a rotation from existing bitcoin vehicles such as futures-based bitcoin ETFs which show outflows of close to $300mn since last Thursday or from retail investors shifting from digital wallets held with exchanges/retail brokers to cheaper spot bitcoin ETFs.

What do you think about JPMorgan’s bitcoin price prediction and the estimated outflow from Grayscale? Let us know in the comments section below.