The digital currency arena has experienced a substantial influx of capital, amounting to $12 billion in net inflows this year. Should this momentum persist, the figure could escalate to $26 billion by year’s end, as elucidated in a recent analysis by JPMorgan.

Spot Bitcoin (BTC) exchange-traded funds (ETFs) have been the primary catalysts, amassing $16 billion in net inflows. When this is amalgamated with the inflows from Chicago Mercantile Exchange (CME) futures and capital generated by crypto venture capital entities, the aggregate inflow into the digital asset market in 2023 reaches a remarkable $25 billion.

However, it’s essential to note that not all these inflows represent fresh capital entering the crypto realm. “We postulate a substantial reallocation from digital wallets on exchanges to the newly introduced spot Bitcoin ETFs,” remarked analysts led by Nikolaos Panigirtzoglou.

This reallocation is mirrored in the decline of Bitcoin reserves across exchanges since the inception of spot ETFs in January, estimated at 0.22 million Bitcoin, or approximately $13 billion. “This suggests that the bulk of the $16 billion influx into spot Bitcoin ETFs since their launch likely signifies a shift from existing digital wallets on exchanges,” the authors elaborated. Applying this premise reduces the net inflow into digital assets for the year to $12 billion from the initially reported $25 billion.

This $12 billion net influx, although robust compared to the previous year, pales in comparison to the bull market peak of 2021/2022, the report noted.

Given Bitcoin’s current price relative to miners’ production costs and gold’s valuation, JPMorgan expressed skepticism regarding the sustainability of these inflows for the remainder of the year.