Morgan Stanley: Spot Bitcoin ETFs Could Reshape Global Crypto Attitudes

Ruholamin Haqshanas
Last updated: | 2 min read
Source: Adobe/wolterke

The crypto landscape has changed dramatically over the past few years, with stablecoin volumes challenging traditional payment giants like PayPal and Visa.

Wall Street is now taking a keen interest in this transformation, specifically through the emergence of spot Bitcoin (BTC) ETFs.

According to Andrew Peel, the head of digital asset markets at investment banking giant Morgan Stanley, this development could signify a “potential paradigm shift in the global perception and use of digital assets.”

In a recent note to investors, Peel examined the current challenges facing the U.S. dollar’s dominance as the world’s primary reserve currency, with 60% of global foreign exchange reserve holdings denominated in dollars.

In stark contrast, China’s yuan accounts for a mere 2.5% of these reserves, despite the country’s efforts to bolster its international trade standing.

Peel outlined various factors contributing to the erosion of the dollar’s supremacy, including the “remarkable” global adoption of Bitcoin, with an estimated 100 million people worldwide holding the cryptocurrency and Bitcoin ATMs operating in 82 countries.

Notably, major entities such as Tesla and even a sovereign nation, El Salvador, have embraced Bitcoin.

Nevertheless, Peel highlighted that stablecoins might emerge as crypto’s “killer app.”

Stablecoin trading volumes have reached levels comparable to established digital clearinghouses like Visa and PayPal.

Even Visa and PayPal themselves have ventured into the stablecoin arena, with Visa integrating USDC on Solana and PayPal launching the PYUSD stablecoin.

JPMorgan Expects Rotational Capital Movement

Contrary to expectations of a massive influx of fresh capital, JPMorgan analysts suggest that spot Bitcoin ETFs may experience up to $36 billion in inflows redirected from existing cryptocurrency instruments.

According to a note by JPMorgan analysts, the breakdown of this anticipated capital movement includes $3 billion from Bitcoin futures-based ETFs, $3-$13 billion from Grayscale Bitcoin Trust (GBTC), and a substantial $15-$20 billion from retail investors transitioning from digital wallets on cryptocurrency exchanges and retail brokers to spot Bitcoin ETFs.

However, the analysts, led by Nikolaos Panigirtzoglou, did not specify the timeframe for these projected inflows.

JPMorgan analysts expressed skepticism regarding the widespread optimism among market participants regarding the approval of spot Bitcoin ETFs potentially leading to a significant injection of fresh capital into the cryptocurrency space.

They proposed an alternative perspective, suggesting that the amount of new capital entering the crypto sector will be influenced more by regulatory developments and, specifically, the extent to which regulators allow the crypto ecosystem to integrate into the traditional financial system over time.

Last week, the SEC granted approval to 11 spot Bitcoin ETFs, marking a significant departure from more than a decade of regulatory opposition.

The decision has opened the door for major traditional financial giants such as BlackRock, Invesco, and Fidelity to provide direct access to funds that invest in Bitcoin.

On their debut trading day, spot Bitcoin ETFs witnessed a remarkable $4 billion in trading volume, as per data from Yahoo Finance.