Strategists at JPMorgan Chase caused a stir in January when they informed clients that approving an exchange-traded fund, or ETF, for bitcoin would be a near-term step toward the digital asset. A British hedge fund manager who specializes in cryptocurrency trading is trying to debunk these claims by saying that JPMorgan’s analysis is not based on quantitative analysis or extensive research.
JPMorgan’s main argument is that the new institutional ETF will compete with the Grayscale Bitcoin Trust, or GBTC, which has accumulated more than $22 billion in assets under management. According to the bank’s strategists, the new ETF could lead to a cascade of GBTC exits and lower premiums.
GBTC enjoys a significant premium over bitcoin, mainly due to its market dominance. Institutional investors who want access to a digital asset without having to buy it directly have few options outside the GBTC.
Tyr Capital Arbitrage SP has written a detailed rebuttal to JPMorgan’s allegations. The fund manager told Cointelegraph: We disagree with JPM’s assessment as there is no evidence that a reduction in the GBTC premium will result in a negative return for BTC in the short term.
On the contrary, we found evidence to the contrary, namely that declines in GBTC premiums are usually accompanied by short-term gains in bitcoin, as shown in a yet-to-be-released report by Tyr.
The report continues:
We found no evidence that deliveries from new shareholders significantly affected the premium. …] To the contrary, we find evidence that deliveries from existing or former shareholders have a negative effect on the premium (and this initially or net of the effect that new shareholders will eventually have).
Nick Metzidakis, head of research at Tyr Capital, told Cointelegraph that his analysis of GBTC’s premium history over the past five years shows that lower premiums have a positive impact on bitcoin.
As for Grayscale Bitcoin Trust, Metzidakis said increased competition could hurt its market share, but that its assets under management will likely continue to grow as more investors invest in bitcoin.
Despite rumors to the contrary, Metzidakis doesn’t think the U.S. Securities and Exchange Commission will give a green light to a bitcoin ETF this year. In other words, the emergence of cryptocurrencies as an asset class could prompt regulators to accelerate the adoption of bitcoin ETFs as they are motivated to provide secure and controlled access to this new asset class.
Institutional acceptance of bitcoin could only have a positive effect on the price of bitcoin in the long run, but could increase its correlation with other asset classes. Especially in times of crisis.
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