JPMorgan analysts have recently analyzed the potential impact of converting the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF). According to their report, these analysts suggest that if the conversion takes place, GBTC could experience outflows of at least $2.7 billion.
The report highlights that traders have been purchasing GBTC shares at a discount, with the intention of profiting from selling off their holdings if the trust converts to an ETF and the share price increases to match its Bitcoin assets.
Calculating GBTC Inflows
The JPMorgan analysts conducted calculations of the GBTC inflows since 2023 and concluded that the conversion to an ETF could result in outflows exceeding $2.7 billion as investors sell off their shares.
The team, led by Global Market Strategy Managing Director Nikolaos Panigirtzoglou, explained their methodology, stating, “To proxy the buying flow into [the Grayscale Bitcoin Trust] since the beginning of the year, we cumulate the daily signed dollar volume, i.e., the daily volume in thousands of shares times the price times the sign of the price change, positive if the price had increased over that day and negative if the price had decreased.”
“This methodology produces an estimate of around $2.5 billion for the net cumulative flow into [the Grayscale Bitcoin Trust] since the beginning of the year. This number increases to close to $2.7 billion if one also adds the covering of the short interest since the beginning of the year,” said the analysts.
It’s worth noting that the estimated $2.7 billion is the minimum outflow, and it could potentially be even higher unless GBTC’s current fee of 200 basis points is reduced to around 50 basis points. The analysts predict that once spot Bitcoin ETFs are approved by the SEC in the U.S., there will be increased competition and the average fee for Bitcoin ETFs will converge towards that of Gold ETFs, currently standing at around 50 basis points.
ARK Investment Management and 21Shares Spot Bitcoin ETF Update
Further context can be found in the recent update filed by Cathie Wood’s ARK Investment Management and 21Shares for their spot Bitcoin ETF application (ARKB). They adjusted the management fee from 70 basis points to 80 basis points.
Bloomberg Intelligence ETF Analyst James Seyffart initially assumed that the fee for ARKB would be lower, “closer to 50 basis points,” which is the average fee across US-listed ETFs. Seyffart notes that the increase to 80 basis points might mean that running these products will be even more costly than initially anticipated.
According to Yahoo Finance, GBTC is currently trading at $30.45, reflecting a 27% increase from a month ago.
