US approval of a Bitcoin-traded fund could weigh in on the price of digital currency in the short term, according to JPMorgan Chase & Co.
This is because competition from such a vehicle could cause exits from Grayscale Bitcoin Trust, the largest cryptocurrency fund traded in the world. The ETF would erode the effective monopoly of the Grayscale trust, causing outflows and a decline in its premium to net asset value – which in turn could affect the price of Bitcoin, strategists led by Nikolaos Panigirtzoglou wrote in a note.
“A cascade of GBTC exits and a collapse of its first would likely have negative short-term implications for Bitcoin, given the importance of GBTC flow and signaling,” they said on Friday.
Some commentators believe that approving a Bitcoin ETF in the US is more likely with a change of leadership at the Securities and Exchange Commission. VanEck Associates Corp. recently submitted to the regulator to provide one, after stopping the previous effort. JPMorgan strategists said the introduction of a Bitcoin ETF should be positive for the long-term cryptocurrency.
Bitcoin fell on Monday, slipping up 15% to about $ 32,400. The decline has shaken faith in the volatile cryptocurrency boom. The digital currency, which reached a record high of nearly $ 42,000 recently, on January 8, was traded at $ 35,400 starting at 8:26 in London.
(Updates with the latest Bitcoin moves in the last paragraph.)