JPMorgan Sounds Alarm Bells: Potential Bitcoin Selloff Looms as Grayscale Funds See Outflow

Global investment bank JPMorgan has raised concerns about an upcoming outflow from Grayscale's bitcoin fund, signaling a potential impact on bitcoin prices in the near future. The bank's analyst, Nikolaos Panigirtzoglou, points to a projected $3 billion outflow from Grayscale's fund, suggesting it could exert "further pressure on bitcoin prices over the coming weeks."

Grayscale Outflow Dynamics

JPMorgan's Panigirtzoglou shared insights into the current bitcoin landscape on LinkedIn, focusing on the launch of spot bitcoin exchange-traded funds (ETFs) and the outflows from Grayscale's bitcoin fund. Grayscale recently transformed its bitcoin trust (GBTC) into a spot bitcoin ETF after receiving approval from the U.S. Securities and Exchange Commission (SEC).

Panigirtzoglou noted a more than 10% decline in bitcoin prices since the spot bitcoin ETFs' launch, attributing it to profit-taking dynamics. Investors had anticipated a rise in BTC prices leading up to the ETF approval, but a drop occurred post-approval. The cryptocurrency is currently trading at $41,697.

Grayscale's Impact on Bitcoin Prices

The analyst highlighted a $1.5 billion outflow from Grayscale's GBTC fund, acting as a drag on bitcoin prices. Investors who had bought GBTC at a discount in anticipation of its ETF conversion opted to take full profit by exiting the bitcoin space entirely instead of shifting to cheaper spot bitcoin ETFs.

Panigirtzoglou estimated that up to $3 billion had been invested in GBTC in the secondary market in 2023, aiming to capitalize on the discount to Net Asset Value (NAV). With $1.5 billion already exited, he suggested a potential additional $1.5 billion exit from the bitcoin space through profit-taking on GBTC, adding pressure to bitcoin prices in the coming weeks.

Cumulative Grayscale Outflow

Grayscale's bitcoin ETF has witnessed an outflow of 50,106.59 BTC since January 12, totaling over $2 billion.

Panigirtzoglou also analyzed other spot bitcoin ETFs launched on January 11, including Blackrock's Ishares Bitcoin Trust (IBIT) and Fidelity's Wise Origin Bitcoin Fund (FBTC). He noted a decent $3 billion inflow in four days, mainly reflecting a rotation from existing bitcoin vehicles and a shift from retail investors' digital wallets to more cost-effective spot bitcoin ETFs.