GBTC Could Face Outflows of $2.7 Billion Upon ETF Conversion, JPMorgan Analysts Estimate

Key Points:

• GBTC could face outflows of up to $2.7 billion upon its ETF conversion.
• GBTC’s high fee of 200 basis points could make it even more attractive for investors to cash out of their holdings once the ETF conversion is approved.
• ARK 21Shares Bitcoin ETF’s proposed fee of 80 basis points suggests that GBTC will need to significantly lower its current fee to prevent substantial outflows and retain its position as the largest and most liquid Bitcoin fund

Analysts at JPMorgan are estimating that GBTC could face outflows of $2.7 billion upon its conversion to a spot Bitcoin ETF. This figure is based on the amount of GBTC shares that have been purchased since the beginning of the year, likely in anticipation of the ETF conversion.

GBTC Could Face Outflows of Billions as ETF Conversion Looms

“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,” they said. The analysts believe that many of these GBTC traders will be looking to cash out upon its ETF conversion. This means GBTC could face outflows of up to billions of dollars.

“GBTC could face outflows of $2.7 billion upon ETF conversion,” the analysts wrote. “This figure could be significantly higher’ if GBTC’s current fee of 200 basis points is not lowered sharply after ETF conversion.” The Grayscale Bitcoin Trust is currently trading at a discount to its net asset value (NAV). This discount has been narrowing in recent months, as investors have become more optimistic about the possibility of the trust being converted to an ETF.

ARK 21Shares Bitcoin ETF Fee Sets Benchmark for GBTC, Raising Stakes for Grayscale

However, the analysts believe that this discount could widen again once the ETF conversion is approved. This would make it even more attractive for investors to cash out of their GBTC holdings. “Once the SEC approves spot bitcoin ETFs in the U.S., we envisage a more intense competition with the average fee for bitcoin ETFs converging towards that of Gold ETFs, which currently stands at around 50 basis points,” the analysts added.

The ARK 21Shares Bitcoin ETF’s proposed fee of 80 basis points suggests that the Grayscale Bitcoin Trust will need to significantly lower its current fee to prevent substantial outflows and retain its position as the largest and most liquid bitcoin fund. Analysts believe that investors will gravitate towards the most cost-effective and liquid ETF over time.

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