Long-term investors are hoarding bitcoin at historically high rates in the hopes that it will finally soar to new heights.
Nevertheless, JPMorgan analysts noted on Wednesday that the factors causing cryptocurrency bullishness—like the upcoming halving of the coin and the approval of spot ETFs—might not have much of an effect on the token.
They claimed that the recent surge in cryptocurrencies was “rather overdone.” The first bitcoin spot ETF in the US appears to be getting approved by the SEC, as evidenced by the 32% increase in price of bitcoin over the previous month. Fund establishment is being spearheaded by major investors like Fidelity and BlackRock.
Though proponents of cryptocurrency have hailed the ETFs as a means of introducing Wall Street’s more conventional investors to bitcoin, JPMorgan analysts are skeptical that this would bring in new money for the market.
Rather, the spot ETFs would draw investment from already-existing bitcoin products, like the bitcoin trust offered by Grayscale, as well as from upcoming ETFs and bitcoin mining firms that have a tendency to accumulate tokens.
According to the note, we see this change as a relative value trade because many of the aforementioned bitcoin products are now trading at a premium or a significantly lower discount than they were in the past.
Spot ETFs that are available in other nations have not drawn much interest from new investors, according to JPMorgan. Since its inception in 2021, the Purpose Bitcoin ETF—the largest physically-backed bitcoin fund—has exhibited low volatility.
Another point raised by analysts was that the SEC’s approval of spot ETFs, which it had previously contested in court, does not necessarily mean a total regulatory turnabout in favour of the cryptocurrency sector.
The note stated that even though the SEC lost two court cases this year, Ripple v. SEC and Grayscale v. SEC, it is unlikely that the industry will see much less regulatory tightening in the future due to its lack of regulation. Regulations pertaining to the US crypto industry are still pending, and given the recent memory of the FTX scam, we do not think US lawmakers would change their minds in light of the aforementioned two court cases.
The agency has been severely policing the industry under Chairman Gary Gensler, labelling it as full of “fraud” and “hucksters.”
The impending bitcoin halving cycle in April is also helping the cryptocurrency markets, regardless of what happens on Wall Street. As a result of this prearranged event, miners receive fewer tokens overall, which puts pressure on the supply going forward and spurs additional price growth.
Although this has historically occurred at every bitcoin halving, according to JPMorgan, the price of the halving has already been factored into the current value of bitcoin.
