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JP Morgan Reveals Likelihood Of Spot Ethereum ETFs Getting Approved

Now that Spot Bitcoin ETFs have been approved by the United States Securities and Exchange Commission (SEC), the crypto space anticipates more ETFs to enter the market, particularly Spot Ethereum ETFs. 

Despite this, analysts at JP Morgan, an American multinational financial service firm, have revealed a less than optimistic outlook for the potential approval of Ethereum Spot ETFs. 

Ethereum Spot ETF Approval Prospects

In a note to clients issued on Thursday, January 18, JP Morgan analysts led by Nikolaos Panigirtzoglou, the Managing Director at the financial service firm, expressed their reservations regarding the anticipated approval of Spot Ethereum ETFs by the SEC.

The analysts cited regulatory and judicial reasons as the basis for their prediction, asserting that the likelihood of Ethereum Spot ETF approval is no higher than 50%. 

“While we are sympathetic to the above arguments, we are skeptical that the SEC will classify ether as a commodity as soon as May,” analysts at JP Morgan stated. 

Just last week, the SEC delayed the approval of Fidelity’s Ethereum Spot ETF. The regulator postponed its decision date to March 5, 2024, stating it needed more time to evaluate Fidelity’s application. Additionally, the deadline for the SEC’s final decision on the Spot Ethereum ETF applications extends from late January to August 2024. 

The most decisive date that would give the crypto space a better outlook on the potential launch of these ETFs is January 25, the deadline for Grayscale’s Ethereum Spot ETF application. 

Earlier in June 2022, Grayscale took legal action against the SEC for its rejection of its Spot Bitcoin ETF. In August 2023, the asset management company emerged victorious in its lawsuit, after the US Columbia Court of Appeal ruled that the SEC was wrong to reject Grayscale’s Bitcoin ETF application. 

With the SEC’s recent approval of Spot Bitcoin ETF after months of legal and regulatory challenges, many crypto enthusiasts anticipate a lengthy regulatory process before the potential approval of Spot Ethereum ETFs. If Ethereum Spot ETFs are accepted by the SEC, then it would offer investors an unprecedented opportunity to gain exposure to the cryptocurrency without the need to own it. 

ETH price chart from Tradingview.com (Ethereum Spot ETFs JP Morgan)

Why ETH Spot ETF Approval Hovers At 50%

Presently, the regulatory framework surrounding cryptocurrencies in the United States is still shrouded in uncertainty. This includes XRP, which suffered a lawsuit from the SEC after the regulator labeled it a security in 2020. Additionally, there have been many other cryptocurrencies the SEC has identified as a security. 

The potential approval of Ethereum Spot ETFs generally hinges on the SEC’s classification of the digital asset, whether it is a commodity or a security. In January 2024, the regulatory agency approved Ethereum futures ETFs, ‘implicitly’ accepting Ethereum as a commodity. 

If the SEC identifies Ethereum as a commodity, then the potential approval of an ETF application may be in sight. However, as JP Morgan analysts have stated, it may take a considerable amount of time before the SEC makes that decision.

The regulatory agency has continually taken an aggressive approach in its regulation of cryptocurrencies in the US. Following the approval of Spot Bitcoin ETFs, SEC Chairman Gary Gensler publicly declared that the agency still does not approve or endorse Bitcoin, labeling all cryptocurrencies as investment contracts subject to federal securities laws.

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Banking Giant CEO Trashes Crypto – Again – And Warns Of Ban: Here’s Why

In a fiery declaration that reverberated through the financial landscape, JPMorgan Chase’s formidable CEO, Jamie Dimon, once again launched a verbal assault on crypto.

Dimon, well-known for speaking his mind, straightforwardly called for a complete ban on digital currencies, linking them to criminal activities without holding back.

The CEO didn’t mince words at a Senate hearing alongside seven other big bank bosses:

“If I was the government, I’d close it down.”

In response to a question from Senator Elizabeth Warren, he stated that he was adamantly against all forms of crypto, including bitcoin.

Dimon expressed worries that terrorists, drug dealers, and rogue states would use them as a means of finance and declared he would shut it down if he were in charge.

Even though Dimon’s bank is deeply engaged in blockchain—the technology that powers the $1.6 trillion cryptocurrency industry—his comments are the most recent assault against the industry.

Dimon Bashes Crypto

In earlier remarks, Dimon referred to bitcoin as “a hyped-up scam,” a term he subsequently withdrew. In addition, he had compared it to a “pet rock.”

In spite of his subsequent admissions of remorse, he continued to use the term “decentralized Ponzi scheme” to describe bitcoin and other digital currencies following his previous tirades.

Dimon and other banking leaders, including Brian Moynihan of Bank of America Corp., have asserted that their institutions have measures to stop terrorists and other criminals from utilizing them.

In contrast, Warren advocated for the extension of anti-money-laundering regulations that banks presently enforce to digital assets, specifically the cryptocurrency market. Every single CEO expressed agreement.

According to sources, JPMorgan completed its first blockchain-based collateral resolution as recently as October in a deal with BlackRock and Barclays.

With its JPM Coin, a proprietary stablecoin that enables users to execute blockchain-based payments, JPMorgan was a pioneer in this space.

JPMorgan said in the next two years, the token may handle up to $10 billion in daily transactions, up from its current level of about $1 billion.

The price of bitcoin, the biggest cryptocurrency in the world in terms of market valuation, has increased by more than 150% this year to about $44,000-plus, according to market tracker CoinMarketCap, despite calls for a government clampdown.

Cryptocurrency Critique Unites Senator With Bankers

Warren took advantage of the session to criticize the cryptocurrency sector by collaborating with Republicans and prominent bankers.

Naturally, Dimon does not have the power of a government and cannot independently initiate the ban of cryptocurrencies.

Being the leader of a private financial company, he may only make suggestions and voice opinions; he cannot implement significant policy changes.

Nevertheless, it demonstrated an unusual convergence of interests between the crypto industry and the senator from Massachusetts, a long-time enemy of banks, who claimed that cryptocurrency was supporting illegal transactions.

The price of bitcoin, the biggest and most popular cryptocurrency in the world, has increased by more than 150% this year and crossed the $44,000 barrier on Wednesday, according to the most recent market data, despite calls for a government shut down.

Featured image from Ting Shen/Bloomberg via Getty Images

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Grayscale’s Bitcoin ETF Conversion Could Lead To $2.7 Billion Exodus: JPMorgan

In a new analysis, JPMorgan has raised concerns about the potential outflow of funds following the possible conversion of Grayscale Bitcoin Trust (GBTC) into an ETF. The banking giant estimates that the conversion could prompt investors to withdraw at least $2.7 billion.

The Grayscale Bitcoin Trust, a pivotal force in the previous bull market, has seen its discount to Bitcoin’s current market price shrink from -46% at the beginning of the year to -9.77% by November 22, the lowest level since mid-August 2021. Notably, this reduction in discount is important because it indicates that investors are expecting the US Securities and Exchange Commission (SEC) to approve Grayscale’s conversion to a spot Bitcoin ETF. However, JP Morgan has cautioned that this conversion might lead to some instability in the market.

$2.7 Billion Exodus Following Bitcoin ETF Approval?

JPMorgan analysts, including Nikolaos Panigirtzoglou, have scrutinized the inflows into GBTC since the beginning of 2023, revealing a calculated strategy by traders to exploit the discount for profit upon ETF conversion. The bank’s methodology considered the cumulative signed dollar volume, accounting for both the volume of shares traded and the direction of the price movement.

The analysts posit that this influx, primarily driven by speculation over GBTC’s conversion to an ETF, will likely reverse as investors seek to capitalize on the arbitrage opportunity presented by the narrowing of the discount to net asset value. The minimum anticipated outflow, upon conversion to an ETF, stands at $2.7 billion.

However, this could escalate if GBTC’s current fee structure, standing at 200 basis points, isn’t significantly reduced post-conversion. The competitive landscape, as suggested by the ARK 21Shares Bitcoin ETF’s 80 basis points fee, necessitates such a reduction for GBTC to maintain its market dominance.

The impact on the market could be profound. A full withdrawal of the $2.7 billion could exert substantial downward pressure on Bitcoin prices. However, JPMorgan analysts believe that much of this capital will likely be reallocated to other Bitcoin-related instruments, mitigating any drastic market disturbance.

They predict a reconfiguration of assets, shifting from $23 billion in GBTC and $5 billion in other funds to $20 billion in the trust and $8 billion in other vehicles. Nonetheless, they caution that a portion of the funds may exit the Bitcoin space entirely, which would pose a risk of a downturn in Bitcoin prices.

Remarkably, JP Morgan analysts led by Panigirtzoglou have predicted in early September that the SEC will be forced to approve spot Bitcoin ETFs after losing the case against Grayscale. Moreover, JP Morgan’s forecast hinges on the assumption that the approval of a batch of ETFs will ignite more intense competition among Bitcoin investment products, likely resulting in a fee structure more aligned with those of Gold ETFs, typically around 50 basis points.

As the market awaits the SEC’s decision, the primary concern remains: Whether the anticipated GBTC outflows will find a new home within the Bitcoin space or if they will signify a broader withdrawal from BTC investments.

At press time, BTC traded at $37,560.

Bitcoin price

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JP Morgan Explains Why Bitcoin Price May Not Fall Further

The cryptocurrency market has been in a declining trend for years. However, reports reveal a possible recovery and bullish turn for popular cryptocurrencies in the space. JP Morgan has predicted a possible price rebound for Bitcoin, saying that long-term liquidations are “largely behind us.”

JP Morgan Sees Upside For Bitcoin Price

JP Morgan, an American multinational financial services firm published an interesting research report on Thursday, August 24. Analysts led by Nikolaos Panigirtzoglou, Managing Director at JP Morgan indicated that crypto markets are likely to emerge from the declining trend from liquidations and market turmoil and move into a correction phase completely. 

They believe that the crypto market has been able to overcome a significant amount of negative factors that push the market to a “limited downside.” Their predictions are also based on the indications of a decline in open interest in Bitcoin futures contracts on the Chicago Mercantile Exchange (CME), a global derivatives marketplace. 

The crypto market has been on a severe declining trend while Bitcoin’s progress has been muffled after experiencing devastating market blows, and regulatory hurdles. The stunning fall of Terra stablecoin was one of the major challenges the industry faced, wiping over $200 billion worth of cryptocurrency assets from the space.

FTX’s collapse has also pushed the evolution of cryptocurrencies back by a couple of years, shattering investor’s confidence in the crypto space and hinting at the lack of a better regulatory framework in the industry. 

The United States Securities and Exchange Commission (SEC) has also been in hot pursuit of new victims, throwing lawsuits against prominent exchanges and crypto firms like Binance, and Coinbase.

All things considered, Bitcoin’s fight against evolutionary pressures has yielded positive results. A crypto analyst provided compelling insights on Bitcoin’s network, revealing that the spikes in on-chain transfers seen in Bitcoin’s network activity are a great indicator for a probable macro uptrend for the cryptocurrency. 

 

Bitcoin Price On The Verge Of Recovery Following Positive Developments In Crypto Space

There have been a significant number of positive developments that have pushed the price of major cryptocurrencies, including Bitcoin upwards. Ripple’s victory against the SEC is among said developments. The XRP ruling by Judge Annalise Torres has brought new optimism in the space and has also provided essential regulatory clarity for cryptocurrencies. 

Additionally, the increase in applications for Bitcoin spot exchange-traded funds (ETFs) has also boosted its price considerably. World-leading financial services providers like Blackrock, Ark Investment, Hashdex, Grayscale, and others are already competing for a spot in Bitcoin ETF. 

There are also reports of a potential collaboration between Bitcoin and Elon Musk’s SpaceX to enable cross-border payments for space-linked activities. 

Overall, the crypto landscape is showing signs of stability as it navigates through major industry hurdles. Crypto investors are also eagerly anticipating the potential recovery of Bitcoin and other cryptocurrencies. 

Bitcoin price cap chart from Tradingview.com (JP Morgan)

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JPMorgan Predicts Bitcoin (BTC) To Revisit $45,000, Here’s Why

In a recent note, JPMorgan strategists have made a prediction, suggesting that Bitcoin (BTC) could soar and revisit its former trading price of $45,000 due to the rising price of gold. This prediction comes amid Bitcoin’s price action of a blend of bulls and bears in the past week.

Meanwhile, over the past 24 hours, BTC has seen a 2.1% gain with a current trading price above $26,000. The current surge comes after Bitcoin previously fall that dropped its price below its previously ranging market price of $28,000.

Bitcoin And Gold: A Correlation

Bitcoin and gold have often been regarded as alternative investments by investors, and their prices have displayed a tendency to move in tandem.

Given this, JPMorgan analysts note that the current gold price, hovering near $2,000 per ounce, implies a Bitcoin price of $45,000. This assumption is based on the idea that BTC will reach a similar standing as gold in the portfolios of private investors.

JP Morgan wrote in a note:

With the gold price rising above $2,000, the value of gold held for investment purposes outside central banks is currently valued at around [$3 trillion]. In turn, this implies a $45,000 price for bitcoin under the assumption that bitcoin equalizes gold in private investors’ portfolios in risk capital or [volume]-adjusted terms.

One key factor contributing to JPMorgan’s optimistic prediction is the upcoming Bitcoin halving event, scheduled to take place between April and May 2024. The halving mechanism reduces the rate at which new Bitcoins are produced, effectively doubling the production cost.

The JPMorgan strategists believe this event will push Bitcoin’s production cost to approximately $40,000, acting as a lower bound and potentially driving the price upward.

Drawing from historical data, JPMorgan highlights the bullish trajectory observed during previous halving events in 2016 and 2020. These events were accompanied by significant surges in Bitcoin prices, indicating the potential for a similar outcome following the next halving.

As a result, JPMorgan sets an upper limit of $45,000 for BTC, indicating limited potential beyond the increase driven by the doubling of production costs.

Reflecting On Ethereum (ETH)

While Bitcoin takes the spotlight in JPMorgan’s prediction, the bank suggests that Ethereum (ETH) may face some selling pressure in the near term, extending beyond the Shanghai upgrade until mid-year. JPMorgan expects Ethereum to “somewhat underperform” BTC during this period.

However, it’s essential to note that Ethereum’s performance is subject to a range of factors, including market dynamics and technological developments.

Meanwhile, regardless of JPMorgan’s prediction, BTC is currently in a bullish trend recording an uptick. Over the past 24 hours, Bitcoin has seen more than a 2% gain, while the past seven days have seen a dip of 1.2%.

Bitcoin (BTC)’s price chart on TradingView

At the time of writing, the top crypto currently trades at $26,823. Bitcoin’s trading volume has, however, ranged around $20 billion in the past 7 days, indicating a possible accumulation. Bitcoin currently has a trading volume of $13.1 billion in the past 24 hours.

Featured image from Shutterstock, Chart from TradingView

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JP Morgan Claims Drop In Bitcoin Production Cost Is Negative For BTC Price

The recent crypto winter has affected miners negatively to the extent that many sold off their Bitcoin and other crypto holdings. In addition, many of these miners could not even pay their loans since their rigs’ values plummeted.

As the price falls, there have been a lot of losses for them, given the cost of producing BTC. But now, recent events show that even the cost of producing the crypto for miners has also dropped.

Recent news states there has been a 50% dip in the cost of producing Bitcoin. JP Morgan Chase & Co stated this in a recent report. JPMorgan Chase & Co is an American-based multinational investment bank.

BTC Production Cost Drops To $13,000

Strategists headed by Nikolaos Panigirtzoglou at Wall Street banking announced the plunging of BTC production costs. According to the report, the Bitcoin production cost as of June 2022 was $24,000. But currently, the production cost stands at $13,000. The strategists added that this could, in turn, hurt the prices of digital tokens.

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They also cited that the primary cause of the decline in the production cost can be traced to the limited use of electricity. This report was drawn from the Cambridge Bitcoin Electricity Consumption Index data.

As per JPMorgan, this can also affect the price of Bitcoin, looking at the present bearish trend of the digital currency market.

Defeat Of Bitcoin Miners

Bitcoin and the whole digital market have been facing a new phase of a bearish market. The event can be traced back to November 2021, after Bitcoin hit its ATH (all-time-high) of $69K.

BTC price trends above $20,000 | Source: BTCUSD on TradingView.com

This occurrence has affected certain high-profile companies and blockchains. A prominent example to note is the crashing of the LUNA digital token, which was based on the Terra blockchain.

Another instance includes the insolvency of Three Arrows Capital (3AC). Also, the information about the hiking rates of the Federal Reserve to fight inflation is another example to note.

Drawing from the crypto market watch, the most significant digital token, BTC, has been fluctuating around the $20K mark. This is about 70% of the digital token’s price drop last year.

The drastic price change in the Bitcoin price posed a high level of uneasiness in the minds of BTC miners. This high price crash was why many BTC miners sold off the digital asset. This was notable in the second quarter of this year.

Suggested Reading | CEL Token Price Plummets 50% As Celsius Goes Bankrupt

With this newest development, miners’ profitability will at least increase, and the craze to sell their holdings will reduce. But analysts believe that the bitcoin price might be affected negatively in the long run since the cost of producing it is now lower. If this keeps happening, investors who already have BTC in their portfolios will lose more.

Featured image from Pixabay, charts TradingView.com

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Ethereum Upgrades Could Jumpstart $40 Billion Staking Industry, JP Morgan

Ethereum upgrades could jumpstart a $40 billion staking industry, according to a JP Morgan report. JP Morgan estimates that the staking industry is currently worth $9 billion and that this number could balloon to $40 billion by 2025.

The report speculates that the launch of ETH 2.0 would lead to more adoption of the coin and could increase staking payouts to $20 billion in the first years of the launch. While $40 billion is a number that could be reached by 2025.

Related Reading | Scaramucci’s Skybridge Capital Launches Ethereum Fund

The report was from two JP Morgan analysts who stated that the returns from staking are an attractive investment in this zero rate climate. Referring to the low-interest rates being given by banks on customer savings.

Introducing Ehereum 2.0

ETH 2.0 is an upgrade to the Ethereum network that will help to improve network security and provide more scalability. ETH 2.0 aims to improve the overall efficiency of the network by introducing sharding to the mix. Sharding is simply a process of splitting a database into smaller pieces so the network is better able to accommodate more load.

The ETH 2.0 upgrade will move the network from proof of work to proof of stake. Drastically reducing the amount of energy required to mine the coins and confirm transactions on the network.

Since proof of work requires machines to solve mathematical equations to confirm transactions on a network, the amount of energy it consumes is tremendous. Bitcoin and Ethereum mining still use proof of work mechanisms, leading to growing concerns about energy consumption in the crypto mining industry. Mining is purported to be the 33rd largest consumer of energy in the world.

Total DeFi market cap from TradingView.com

Current total DeFi market cap | Source: Crypto Total DeFi Market Cap on TradingView.com

Proof of stake on the other hand achieves the same result of confirming transactions on the blockchain sans solving complex mathematical equations. Proof of stake allows holders of a coin to be validators of a transaction. The mechanism uses a pseudo-random selection process to select a node to be the validator for the next block.

According to the Ethereum website, this will happen in three stages. The first is the Beacon Chain. The Beacon Chain is already live and with it came staking. It will also lay the groundwork for future upgrades and coordinate the entire system.

Next is the Merge. This will be the merging of the Mainnet Ethereum with the Beacon Chain. The merge is estimated to go live in 2021.

Lastly will be the addition of the shard chains. Shard chains will increase the capacity of Ethereum to process transactions and store data. ETA for the addition of shard chains has been set at 2022.

Staking Pays Significantly More Yield

The report went in-depth about why staking might be the new preferred way of investing. Staking provides up to 13% yield on crypto balances, and more in some cases. Compared to traditional banks and investments like bonds, this is a much more attractive investment opportunity for investors.

“Yield earned through staking can mitigate the opportunity cost of owning cryptocurrencies versus other investments in other asset classes such as U.S. dollars, U.S. treasures, or money market funds in which investments generate some positive nominal yield.” – JP Morgan analysts report on staking.

The report also pointed out that rewards from staking could be a way to mitigate against inflation. The rise of staking as a way of earning passive income will be on the rise.

Related Reading | How Ethereum Can Reach $2 Trillion In Market Cap, Matthew Sigel

Already, current market capitalizations of staking tokens have already exceeded $150 billion. And this number will only continue to grow as staking becomes more mainstream.

JP Morgan has been looking to give customers crypto options despite their CEO Jamie Dimon not being in support of crypto. Reports are that the company is preparing to offer customers a Bitcoin fund.

Featured image from CYBAVO, chart from TradingView.com