JPMorgan Sees Limited Further Downside For Bitcoin With Grayscale’s GBTC Profit-Taking Now Over — Can BTC Retake $50,000?

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Analysts from JPMorgan Chase think the downward pressure on Bitcoin’s price has been capped as profit-taking on the crypto investment vehicle, the Grayscale Bitcoin Trust (GBTC), has now likely concluded.

The Worst Is Over

JPMorgan has shared a positive outlook for Bitcoin, indicating that the top cryptocurrency has a limited downside from its current level.

“GBTC profit taking has largely happened already,” observed the bank’s strategists led by market strategy managing director Nikolaos Panigirtzoglou in a Thursday research report. “This would imply that most of the downward pressure on Bitcoin from that channel should be largely behind us.”

The price of Bitcoin has steadily declined since the groundbreaking spot BTC exchange-traded funds (ETFs) officially launched on January 11.

The price of the ascendant crypto first rocketed and almost tapped $49,000 for the first time in two years. But then it took a deep nosedive. This is because Grayscale’s GBTC was seeing massive outflows following its conversion to a spot market ETF.

Billions of dollars worth of GBTC were cashed out in the first few days after the ETF hit Wall Street. This led to bearish selling pressure on the Bitcoin price — and the broader crypto market, too.

JPMorgan analysts tipped the fund’s approximately $4.3 billion outflows since its transformation to an ETF as “profit-taking on previous GBTC investments” and the cause of BTC’s over 19% price tumble to under the $39,000 mark.

But the selling pressure is now calming.

Grayscale’s Bitcoin spot ETF GBTC had a net outflow of $394 million on January 25, with a single-day trading volume of $502 million. Net outflows slowed slightly over 3 trading days ($429 million on January 24, $515 million on January 23, and $640 million on January 22).…

— Wu Blockchain (@WuBlockchain) January 26, 2024

However, despite the optimistic outlook, JPMorgan warned that these outflows could continue if GBTC’s pricey 1.5% fee isn’t lowered soon. This will eventually result in Grayscale losing market share to competitors.

“There appear to be two emerging competitors to Grayscale’s bitcoin ETF: BlackRock and Fidelity, which have so far attracted $1.9 billion and $1.8 billion of inflows, respectively. They both have much lower fees of only 25 basis points (without waivers) vs 150 basis points for GBTC,” the analysts posited.

Bitcoin surpassed $41,400 today to register gains of about 3.6% in the last 24 hours. If BTC maintains its position above the psychologically important  $40,000 support, the next key resistance to look out for will be around $42,000, a region where we might see some consolidation before a potential ballistic push toward $50,000.

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