The report acknowledges that physical-backed Bitcoin ETFs offer certain advantages over futures-based funds.
in search a report Released Thursday, JPMorgan Chase & Co (NYSE:JPM), one of the world’s leading financial institutions, believes that approval of a bitcoin spot exchange-traded fund (ETF) by the US Securities and Exchange Commission (SEC) will not have a systemic transformative effect. the broader digital currency ecosystem.
Recent actions by BlackRock Inc (NYSE:BLK), Invesco Ltd (NYSE:IVZ), Fidelity Investments and other asset managers to offer instant Bitcoin ETFs already reflect the growing interest and competition in the crypto space.
However, JPMorgan argues that approval of a Bitcoin ETF may not automatically lead to increased investor participation or a significant shift in market dynamics as many expected. The research highlights the lack of significant investor interest in Bitcoin ETFs that were available outside the US, specifically in Canada and Europe.
Additionally, the report highlighted that Bitcoin funds in general, including futures-based and physical-backed funds, have seen limited investor interest since the second quarter of 2021.
Furthermore, the report notes that bitcoin funds have failed to capitalize on investor outflows from gold ETFs over the past year. Notably, gold has traditionally been considered a safe haven asset and store of value, often attracting investors during times of economic uncertainty or market volatility.
The fact that bitcoin funds have not been able to capture investor outflows from gold ETFs suggests that there may be specific factors or preferences affecting investors’ decision-making processes.
Comparing the Spot Bitcoin ETF to Futures Products
The report acknowledges that physical-backed Bitcoin ETFs offer certain advantages over futures-based funds, albeit relatively marginal ones.
It highlights that spot ETFs provide a more direct and secure way to gain exposure to bitcoin, removing some of the complexities associated with holding and transferring bitcoin. In contrast, products based on futures contracts have fundamental risks and may not offer the same level of outright ownership.
One of the main advantages mentioned is that spot ETFs are more likely to reflect supply and demand dynamics in real time. This means that the price of the ETF will closely reflect the actual bitcoin price changes. This feature improves price transparency in the Bitcoin spot markets and may lead to improved liquidity.
According to the report, the approval of spot ETFs in the United States will bring many benefits to the cryptocurrency market. It will enhance pricing transparency, as investors will be able to access real-time pricing information through the ETF. This increased transparency could also contribute to more efficient price discovery in the Bitcoin spot markets.
However, the bank noted that the introduction of spot Bitcoin ETFs has the potential to redirect trading activity and liquidity away from previously approved US Bitcoin futures markets if spot ETFs replace futures-based alternatives.
Remarkably, the coexistence of both spot ETFs and futures-based products is still potential, as they may serve different purposes and attract different types of investors.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about real-world applications of blockchain technology and innovations to drive public acceptance and global integration of the emerging technology. His desires to educate people about cryptocurrencies have inspired his contributions to popular blockchain-based media and websites. Benjamin Godfrey is a fan of sports and farming.