Bitcoin ETF approval unlikely to be game changer, says JPMorgan

The recent surge in proposals for physical bitcoin-backed ETFs by major asset managers, including BlackRock, has contributed to bitcoin reaching over one-year highs. Market participants hope that these ETFs would drive broader adoption of cryptocurrencies. However, JPMorgan argues that even if the proposals were approved by the U.S. Securities and Exchange Commission (SEC), it is unlikely to have a significant impact on the crypto markets.

JPMorgan says there are several reasons for supporting this viewpoint. Firstly, existing spot bitcoin ETFs in Canada and Europe have struggled to generate substantial investor interest. For instance, the Canada-listed Purpose Bitcoin ETF, currently the world’s largest physically backed bitcoin ETF with approximately $600 million in assets under management, has experienced a stagnant flow profile since its launch in February 2021.

Secondly, overall bitcoin funds, including both futures-based and physically backed funds, have seen limited investor appeal since the second quarter of 2021. They have not witnessed significant inflows despite outflows from gold ETFs, indicating a lack of strong demand.

Lastly, the introduction of spot bitcoin ETFs could potentially cause a shift in trading activity and liquidity away from U.S. bitcoin futures markets. This migration of market activity could impact the dynamics of the futures markets, which have played a crucial role in bitcoin trading.