JPMorgan has issued a significant warning regarding Bitcoin, highlighting that the demand for spot-based exchange-traded funds (ETFs) tied to the cryptocurrency is considerably overestimated.
The banking giant emphasizes that not all inflows represent fresh capital from institutional investors. Instead, there has been a notable shift away from cryptocurrency wallets on exchanges. Bitcoin ETFs have become the favored method for Bitcoin exposure due to factors such as cost-effectiveness, regulatory protection, and deeper liquidity.
Following the introduction of spot ETFs, exchanges saw a significant decrease in Bitcoin reserves. JPMorgan revealed that a majority of the $25 billion ETF inflows recorded since January are merely rotations from existing digital wallets, undermining the bullish narrative of substantial institutional demand.
JPMorgan estimates the actual net inflows into Bitcoin ETFs to be around $12 billion. The bank also noted that Bitcoin prices are currently high relative to the production cost of the cryptocurrency, which suggests limited inflows in the coming months. On Thursday, Bitcoin ETFs experienced $244 million in outflows, and the cryptocurrency remains below the $67,000 mark.
Prominent analyst James Seyffart pointed out that it has been long recognized that some inflows are simply recycled Bitcoin. "To be fair, this broad assessment has been accepted and known virtually since the day they launched," he said. Seyffart also questioned the accuracy of JPMorgan's figures, suggesting that the portion of recycled coins might be overestimated.
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