The euphoria over the launch of Bitcoin ETFs will be short-lived, according to JP Morgan.
JP Morgan: the launch of Bitcoin ETFs will not bring in new money
Investors have shifted from gold ETFs to Bitcoin ETFs because they see it as a better hedge against inflation, according to a note from the bank. JP Morgan analysts write:
“By itself, the launch of BITO is unlikely to trigger a new phase of significantly more fresh capital entering Bitcoin. Instead, we believe the perception of Bitcoin as a better inflation hedge than gold is the main reason for the current upswing, triggering a shift away from gold ETFs into Bitcoin funds since September”.
JP Morgan also looks back at what happened in Canada: when the first Bitcoin ETF was launched, it was very successful. Then, after an initial buying phase, the excitement died down. The same could happen, if not already, for Bitcoin ETFs in the US.
Bitcoin as a hedge against inflation
JP Morgan is actually not detecting anything new. Bitcoin has long been proving to be an excellent inflation hedge. The success of Bitcoin ETFs shows that institutional investors have been waiting for just one more instrument.
After all, in the first two trading days, Proshares’ ETF, BITO, reached $1 billion in volume. At the same time, the price of Bitcoin hit a new all-time high at $66,000.
It then deflated, but after a downward slide over the weekend, today BTC is gaining 4% and is back to within a hair’s breadth of $63,000, ready to make an assault on the previous record of October 20.
More ETFs enter the market
However, according to analysts consulted by Yahoo Finance, ProShares will have a significant first mover advantage.
Jon Wolfenbarger, an analyst and founder of investment site Bull And Bear Profits, said:
“There are significant economies of scale with ETFs. The first mover advantage is powerful”.
Citing the case of the actively managed blockchain-based ETFs, BLOK and BLCN, it is noted that they were launched one day after the other and a week before two other competing funds, LEGR and KOIN. Well, today,
“BLOK manages 75% of the total assets among those four ETFs”.
Admittedly, Valkyrie’s debut was not the best as it ran into a bearish Bitcoin market and lost 4%, as did the ProShares ETF.
However, it seems that the two are not destined to compete because of their fees, both of which are set at 0.95%.