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Grayscale Bitcoin Trust faces more than $3bn in outflows if fees don’t drop, JPMorgan says

Grayscale Bitcoin Trust faces more than $3bn in outflows if fees don’t drop, JPMorgan says
JPMorgan expects outflows of around $2.7 billion from GBTC on approval of a spot Bitcoin ETF. Credit: Shutterstock / 24K-Production
  • Conversion to a spot Bitcoin ETF could open the floodgates for GBTC as investors look to realise gains.
  • Outflows from the fund could put “severe downward pressure on Bitcoin prices,” JPMorgan analysts warn.

Happy Friday!

JPMorgan analysts suggest that if the Grayscale Bitcoin Trust, the flagship fund of digital asset manager Grayscale, receives approval to transform into a spot Bitcoin exchange-traded fund, investors might withdraw as much as $2.7 billion. That could put “severe downward pressure on Bitcoin prices,” analysts said.

Let’s dig in!


JPMorgan, as well as ETF analyst Eric Balchunas, expect a spot Bitcoin ETF to be approved before January 10, 2024.

While this has been seen as a bullish event for the crypto market, questions remain such as how much money could investors pull out of GBTC, if it is converted into a spot ETF?.

JPMorgan estimates that $2.7 billion could flow out of the fund if it was converted into a spot Bitcoin ETF.

GBTC has seen around $2.7 billion in net flows since the beginning of 2023, JPMorgan analysts said in a Thursday report.

Assuming this was mostly driven by speculative bets on the trust being converted to an ETF, “it is likely that this $2.7 billion would come out of GBTC as these investors take profit,” the report said.

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Such outflows would put “severe downward pressure on Bitcoin prices,” analysts led by Nikolaos Panigirtzoglou, managing director of global market strategy at JPMorgan, said.

However, the bank estimated that most of these outflows would be reallocated into other spot Bitcoin ETFs. This is assuming the US Securities and Exchange Commission approves multiple funds at once, which is widely expected by analysts and issuers alike.

In this case the market impact would be “more modest.”

“Nevertheless, the balance of risks for Bitcoin prices is skewed to the downside in our opinion as some of this $2.7 billion is likely to completely exit the Bitcoin space,” it said.

JPMorgan also identified a further risk to GBTC: its high fee structure.

Currently, the asset manager charges clients a 2% annual management fee, which is almost double what similar funds in Canada and Europe charge investors — where fees are closer to 1.07%.

If this fee is not “sharply” lowered after conversion, analysts said, then “significantly more money” could exit.

JPMorgan expects intense competition once spot Bitcoin ETFs are approved. It anticipates the average fee will converge towards that of Gold ETFs, which is around 0.5%.

For example, Cathie Wood’s Ark Invest indicated it would charge 0.8% for its spot Bitcoin ETF.

Ark Invest is a major investor in GBTC and has built up a significant position this year.

DL News reported in September that approval could lead to reallocations away from GBTC on approval.

Several hedge funds have also clamoured to force Grayscale to offer redemptions, to “unlock value for investors.”

Fir Tree Capital, a hedge fund, has sued Grayscale in an attempt to force the asset manager to make a tender offer to investors — a method for investment trusts like GBTC to manage their share prices and provide liquidity to shareholders who want to exit their positions.

The hedge fund said its proposed tender offer schedule could result in $3.6 billion in immediate value for participatingGBTC shareholders.

Crypto market movers

  • Bitcoin traded around $38,000 on Friday, up 1.5% in the past day.
  • Ethereum gained 2% as it flirted with $2,100.

What we’re reading

Adam Morgan McCarthy is DL News’ London-based Markets Correspondent. Got a tip? Reach out at