JP Morgan Analysts Want You to Short Coinbase and, by Extension, Bitcoin, but Do They Really?

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Wall Street is quite notorious for not always walking the talk: its analysts might publicly recommend a particular course of action, but that does not necessarily mean that the banks’ internal trading teams follow that “fount of wisdom.” A recent investment note from JP Morgan has again raised the proverbial hackles of Bitcoin bulls, especially as the note hammers on a thesis that is superficially accurate but lacks proper context.

JP Morgan has claimed in a new investment note that the spot Bitcoin ETFs attracted $1.5 billion in inflows through the end of January, “considerably less than the flows seen in the weeks after Gold ETFs launched in 2004.” So, “with limited evidence of a volume follow through,” the Wall Street behemoth has urged investors to short Coinbase as a proxy for Bitcoin.

Yet, this simplistic narrative needs to be properly contextualized, as was done by none other than Bloomberg’s Eric Balchunas. While the Bloomberg analyst concedes that cumulative net inflows are currently at $2.7 billion (other sources place this number at $2.23 billion), which is below the inflation-adjusted initial inflows in Gold ETFs, by excluding the Grayscale Bitcoin Trust ETF (GBTC) that is facing idiosyncratic issues and including the “big nine” out of the eleven total spot Bitcoin ETFs launched, we get inflows of $8.2 billion in the first twenty days alone! For context, Gold ETFs managed to attract $7.2 billion in inflows over their first three years. This means that the launch of these ETFs has not been a disappointment by any definition.

In fact, the spot Bitcoin ETFs are now buying up around 12.5x more Bitcoin each day than can be produced via mining. This is a phenomenal tailwind, which is expected to play an important role in boosting the world’s top cryptocurrency by market capitalization to the $52,000 price level in February, as per a note by 10x Research.

While we are sure JP Morgan has a perfectly reasonable explanation for recommending a short on Coinbase, we can’t help but remain a tad skeptical, especially given Bitcoin’s upcoming halving event and expectations of rip-roaring gains ahead. In fact, as we noted in an earlier post, Bernstein analysts believe that “Bitcoin’s best days are yet to happen as the ETF-driven market fuels fears of missing out (FOMO).”

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