In a note, JPMorgan Chase strategist Nikolaos Panigirtzoglou and team explained why they believe an ETF would hurt the Bitcoin price in the short term. They said it would create competition for the Greyscale Bitcoin Trust (OTC:GBTC), which is the biggest traded cryptocurrency fund in the world.
Grayscale essentially has a monopoly, and competition from an ETF would trigger outflows. As a result, the trust's premium would fall to its net asset value, which the JPMorgan (NYSE:JPM) team said could weigh on the Bitcoin price in the short term. However, in the long term, they believe an ETF would be good for the Bitcoin price.
ETF approval looks more likely
Various firms have been trying to get a Bitcoin ETF approved for years. VanEck is the latest company to try to list one. It filed for approval for one with the Securities and Exchange Commission. VanEck has tried before to get a Bitcoin ETF approved, but it backed off.
According to Bloomberg, some experts believe U.S. regulators may be more likely to approve a Bitcoin ETF under the new leadership that will be installed under the Joe Biden administration.
In November, Bloomberg reported that Fundstrat's Tom Lee said the Bitcoin price needed to be about $150,000 before the cryptocurrency could cope with the daily demand created by an ETF. At the time, the cryptocurrency was trading at around $8,400.
Bitcoin price slides
The Bitcoin price hit yet another record high just days ago, approaching $42,000. However, CNBC reports that within the last 24 hours, almost $170 billion has been taken out of the cryptocurrency market. Bitcoin declined from its record high, pulling other digital currencies along with it.
The crypto market's value stood at $959.53 billion late Sunday night, compared to $1.1 trillion the day before, based on data from Coinmarketcap. Bitcoin isn't the only cryptocurrency that has been falling. Ether, which is the second-largest digital currency, fell by about 20% by 9 a.m. Eastern.
The declines suggest some profit-taking in the crypto market. Despite the fall, the Bitcoin price is still up more than 340% over the last 12 months.