JPMorgan Says Spot Bitcoin ETF Won’t Be A Game Changer for the Market

World’s largest banking institution JPMorgan recently shared its opinion about the flood of filings for the spot Bitcoin ETF over the last month. The banking giant believes that having a spot Bitcoin ETF in the market is unlikely to be game changer for the entire crypto market.

This view is quite contrarian to what a large number of crypto enthusiasts believe. With BlackRock filing for spot Bitcoin ETF last week, a number of other big players joined the bandwagon and submitted their filings to the US SEC.

JPMorgan believes there is increased optimism that the SEC will approve a Bitcoin ETF, as recent filings have potentially addressed previous concerns. Despite receiving numerous applications, the SEC has not yet approved such an ETF.

In a report on Thursday, July 6, JPMorgan strategists led by Nikolaos Panigirtzoglou wrote: "The potential approval of physically backed bitcoin ETFs by the SEC [Securities and Exchange Commission] is unlikely to be a game changer for crypto markets. Spot bitcoin ETFs [have] existed for some time outside the U.S., in Canada and Europe, but have failed to attract large investor interest”.

According to the note, physical backed Bitcoin ETFs provide certain advantages over futures-based funds, although these advantages are relatively small. Spot ETFs offer a more straightforward and secure method to invest in Bitcoin, eliminating complexities related to custody, BTC transfer, and the risks associated with futures-based products.

However, JPMorgan added that “Spot ETFs are more likely than futures based ETFs to reflect real time supply and demand and their approval in the U.S. would bring more liquidity and enhance price transparency in spot bitcoin markets”.

According to analysts, spot bitcoin ETFs can provide better liquidity and price transparency by reflecting real-time supply and demand. However, if spot bitcoin ETFs replace futures-based Bitcoin ETFs, there may be a shift in trading activity and liquidity from the U.S. bitcoin futures markets.

The banking giant also noted that Bitcoin funds, both futures-based and physically backed, have seen limited investor interest since the second quarter of 2021. They have also missed out on the flow of investments from gold ETFs that occurred in the past year.

Big finance companies like BlackRock and Fidelity are competing to get approval for a spot bitcoin ETF. In the past, the SEC didn't approve any of these ETFs, but now there is hope that they might change their stance. One of the main concerns was the lack of surveillance, but now ETF filers are promising to work with exchanges like Coinbase to address this issue.