The latest crypto rally is “fairly exaggerated,” JPMorgan wrote in a note this week.
The possible launch of bitcoin spot ETFs in the US is unlikely to bring fresh capital.
Meanwhile, next year’s bitcoin halving event is already priced in, analysts say.
Still, factors driving the cryptocurrency’s growth — such as the impending approval of spot ETFs and the upcoming coin halving — may end up having little impact on the token, JPMorgan analysts wrote on Wednesday.
In fact, the cryptocurrency’s recent surge is “quite exaggerated,” they said. In the past month, bitcoin is up 32% as the SEC appears to be moving closer to approving the first bitcoin spot ETF in the US. Investment giants such as BlackRock and Fidelity lead efforts to establish such funds.
But while crypto-enthusiasts have touted ETFs as a way to introduce more traditional Wall Street investors to bitcoin, JPMorgan analysts aren’t convinced it would inject fresh capital into the space.
Instead, spot ETFs would attract investment from existing bitcoin products, such as Grayscale’s bitcoin trust, future ETFs and bitcoin mining companies, which tend to hoard tokens.
“We view this change as a relative value trade as several of the bitcoin products listed above are trading at a premium or significantly reduced discount to the past,” the note said.
As for new investors, spot ETFs that exist in other countries have failed to attract impressive interest, JPMorgan noted. The largest physical-backed bitcoin fund, the Purpose Bitcoin ETF, has been relatively unchanged since its launch in 2021.
Analysts also noted that the SEC’s approval of spot ETFs — which the agency first challenged in court — does not represent a complete regulatory reversal for the crypto industry.
“While this year’s court rulings Ripple v. SEC and Grayscale v. SEC represent legal defeats for the SEC, it is not clear that regulatory tightening of the crypto industry will be significantly reduced in the future given how unregulated the industry is,” it said. notes. “Regulations of the US crypto industry are still pending, and we do not believe that US regulators would change their position due to the above two legal cases, especially the recall from The FTX scam is still fresh.“
Under Chairman Gary Gensler, the agency took a strict approach in the supervision of the sectorcharacterizing him as a “fraud” and a “fraudster”.
Regardless of the outcome on Wall Street, crypto markets are also getting a boost from the upcoming Bitcoin halving cycle in April. This predetermined event reduces the amount of tokens allocated to miners, putting pressure on future supply and encouraging further price growth.
While this has historically happened at every halvingJPMorgan says the price of the halving has already been factored into the price of bitcoin at its current level.
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