Here’s why the approval of a US bitcoin ETF would send the cryptocurrency tumbling in the near term, according to JPMorgan

Here’s why the approval of a US bitcoin ETF would send the cryptocurrency tumbling in the near term, according to JPMorgan

REUTERS/Lucas Jackson

Approval of a bitcoin ETF in the US could pull investors out of a popular trade and erode a key support to the cryptocurrency's lofty price, JPMorgan strategists said Friday.Institutional investors largely invest in the Grayscale Bitcoin Trust for regulatory reasons instead of directly buying bitcoin. Yet the trust touts a premium to the underlying token.The Securities and Exchange Commission is expected to authorize a bitcoin ETF in 2021. Such a fund's introduction could drive institutional investors out of Grayscale's trust and cut into the premium.While outflows from Grayscale's trust could present a near-term pressure for bitcoin prices, JPMorgan still expects bitcoin ETFs to benefit the cryptocurrency in the longer term.Watch bitcoin trade live here.

The introduction of a bitcoin exchange-traded fund in the US is likely to pull investors out of a popular buying option and create a near-term drag on the token's price, JPMorgan said Friday.

The Securities and Exchange Commission is expected to approve of such an ETF this year as the Biden administration brings new leadership to the agency. Regulatory authorization would strengthen bitcoin's investment case in the long term. But, more immediately, approval will likely sap investor capital from the Grayscale Bitcoin Trust, according to