JPMorgan analysts predict that the Grayscale Bitcoin Trust (GBTC) could experience outflows exceeding $2.7 billion upon its conversion to an ETF.

Traders, attracted by the discount to net asset value, have accumulated GBTC shares in anticipation of a profitable conversion to a spot bitcoin ETF.

Analysing GBTC inflows since 2023, JPMorgan estimates the potential value of shares to be sold post-conversion at around $2.7 billion.

Analysing GBTC Inflows

To gauge buying activity in GBTC, JPMorgan employs a method based on daily signed dollar volume.

The cumulative estimate for net inflows into GBTC since the start of the year stands at approximately $2.5 billion. Adding the covering of short interest, the figure rises to nearly $2.7 billion.

The surge in GBTC purchases is attributed to speculation about its ETF conversion.

Analysts anticipate investors exiting to take profits, given the earlier discounted acquisitions. The current discount to net asset value is below 10%, a level not seen since July 2021.

Minimum Outflow Projection

JPMorgan's minimum outflow projection is $2.7 billion, with the possibility of a higher amount if GBTC's 200 basis points fee isn't substantially reduced post-ETF conversion.

The competition with spot bitcoin ETFs, expected after SEC approval, could lead to fee convergence around 50 basis points.

Market Impact Considerations

A complete $2.7 billion exit could exert significant downward pressure on bitcoin prices.

However, analysts believe most of the funds may shift to other bitcoin instruments, mitigating the negative market impact. This would reshape the balance of assets in the bitcoin fund space, with $20 billion in the trust and $8 billion elsewhere.

In a positive note, JPMorgan comments on Binance's recent settlement with U.S. agencies, expecting it to benefit the crypto exchange and the industry.

The settlement could contain market share losses and potentially attract traditional market participants and investors to regulated crypto entities and instruments.