Any U.S. Securities and Exchange Commission (SEC) approval of a spot bitcoin exchange-traded fund (ETF) will not be a game-changer for crypto markets for a number of reasons, according to JPMorgan (JPM) in a research report Thursday. Despite the numerous applications for a spot bitcoin ETF, the SEC has yet to approve one. However, recent filings have raised optimism that the regulator may approve one.
JPMorgan noted that spot bitcoin ETFs have existed for some time outside the U.S., in Canada and Europe, but have failed to attract large investor interest. A unit of BlackRock filed paperwork last month for the formation of a spot bitcoin ETF, prompting other asset managers such as Invesco and Wisdom Tree to apply or re-apply as well.
The report also stated that bitcoin funds overall, including futures-based and physically-backed funds, have attracted little investor interest since Q2 2021, also failing to benefit from investor outflows from gold ETFs over the past year or so. Physical-backed bitcoin ETFs offer some advantages over futures-based funds, but these are rather marginal. Spot ETFs offer a more direct and secure way to gain exposure to bitcoin, removing some of the complexities around direct custody and transfer of BTC and the basis risk associated with futures-based products.
JPMorgan concluded that the introduction of spot bitcoin ETFs could lead to a migration of trading activity and liquidity away from U.S. bitcoin futures markets, to the extent spot bitcoin ETFs replace futures-based bitcoin ETFs.