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The market reaction when a bitcoin exchange-traded fund finally gets approved may not match the current buildup, according to JPMorgan. Bitcoin has been breaking through one resistance level after another as excitement around the potential of a bitcoin ETF approval in January intensifies, putting the cryptocurrency at overbought levels similar to those seen in the 2021 bull market, analyst Nikolaos Panigirtzoglou said in a note Thursday. "We are cautious on crypto markets into 2024 and we continue to see a high chance of buy-the-rumour/sell the-fact effect once the SEC approves spot bitcoin ETFs early next year," he said. The bull thesis assumes a bitcoin ETF would help attract new capital into the crypto market, particularly from institutional investors who have been interested or at least curious, but remained on the sidelines waiting for a regulated product. JPMorgan disagrees. "Instead of fresh capital entering the crypto industry to be invested in the newly approved ETFs, we see as a more likely scenario existing capital shifting from existing bitcoin products likethe Grayscale Bitcoin Trust, bitcoin futures ETFs and bitcoin mining stocks into the bitcoin ETFs," Panigirtzoglou said. "We envisage this shift as a relative value trade as several of the above bitcoin products trade at a premium or reduced discount relative to the past," he added. He also said the firm disagrees with the idea that ETF approval would cement a win for the crypto industry as well as a setback for the U.S. Securities and Exchange Commission, which has rejected bitcoin ETF proposals repeatedly over the past decade and until recently showed little interest in helping bring one to market. CNBC's Michael Bloom contributed reporting.

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JPMorgan is skeptical of crypto next year, says ETF approval may be 'sell-the-news' event - CNBC