Bitcoin prices may face further downward pressure if GBTC investors continue to take profit, says JPM

Bitcoin prices could face further downward pressure in the coming weeks if investors in Grayscale Bitcoin Trust (GBTC) continue to take profits, according to analysts at JPMorgan.

GBTC converted into a spot bitcoin ETF last week and has already seen over $1.5 billion worth of outflows. Last week, JPMorgan estimated that GBTC's outflows could be as high as $3 billion, largely due to possible profit-taking by speculative investors.

If the previous $3 billion estimate proves correct and given $1.5 billion has exited already, then there could be an additional $1.5 billion still to exit the bitcoin space via profit-taking on GBTC, thus putting further pressure on bitcoin prices over the coming weeks, JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a note on Thursday.

Analysts also noted that GBTC investors bought shares of the fund at a significant negative premium over the past year in preparation for its eventual ETF conversion. After GBTC's conversion to an ETF, investors realized their full profits by exiting the bitcoin market altogether. These outflows have also put pressure on the GBTC fund to lower its rates, with analysts reiterating their view that GBTC's current 1.5% rate is too high compared to other spot bitcoin ETFs.

Additionally, JPMorgan analysts mentioned that GBTC is at risk of further capital outflows, although for some institutional investors, the rate is not the only reason for deciding whether or not to move to a cheaper spot Bitcoin ETF.

They added that if other bitcoin spot ETFs become critical mass in terms of size and liquidity, GBTC could lose its liquidity advantage, with an additional $5 billion to $10 billion in outflows expected.