JPMorgan Predicts $62 Billion Bitcoin Spot ETF Market in 2-3 Years
J.P. Morgan has released a report suggesting that Bitcoin spot exchange-traded funds (ETFs) are unlikely to experience significant growth in assets under management (AUM) in the long term. The report, authored by analysts led by Nikolaos Panigirtzoglou, states that when comparing Bitcoin ETFs to gold and adjusting for volatility, the “realistic size” of the market over the next two to three years is estimated to be around $62 billion.
This projection is more conservative compared to the expectations of more bullish crypto analysts who have already seen $9.3 billion in net flows into Bitcoin ETFs in the two months since their launch. Additionally, with the appreciation of Bitcoin’s price during this period, ETFs like Grayscale have witnessed their AUM increase from $30 billion to over $50 billion.
JPMorgan believes that the optimistic projections fail to consider the risks associated with Bitcoin, leading to an overestimation of the proportion of investors’ portfolios it will comprise. The bank argues that given Bitcoin’s volatility, which is around 3.7 times higher than that of gold, it would be unrealistic to expect Bitcoin to match gold in terms of notional amounts within investment portfolios.
To arrive at the estimated market size of Bitcoin ETFs, JPMorgan divided the total amount of gold held by investors (which amounts to $3.3 trillion) by the volatility multiple against Bitcoin (3.7), resulting in a total Bitcoin allocation of $900 billion. This implies a price per coin of $45,000, significantly lower than Bitcoin’s current market price of $69,000.
JPMorgan’s analysis also took into account the gold held by funds, which amounts to $230 million, and divided it by the volatility multiple to arrive at the estimated market size of $62 billion for Bitcoin ETFs. However, it is worth noting that some of these funds may have been rotated out of other Bitcoin-based investment vehicles and into the ETFs.
In the United States, gold ETFs hold approximately $92 trillion in assets, making them the largest commodity ETFs in the country after Bitcoin. Both Bitcoin and gold are frequently compared as investment vehicles due to their similarities, such as the absence of intrinsic cash flows and their function as strong hedges against inflation.
Larry Fink, the CEO of BlackRock, has often referred to Bitcoin as “digital gold” when discussing Bitcoin ETFs and has described the interest in the asset among investors as a “flight to quality.”