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Bitcoin is the digital world’s non-sovereign reserve currency and serves as a unique way to diversify portfolios, consequently enhancing total risk-adjusted returns. However, despite numerous possibilities for capitalizing on this preeminent virtual asset, there remained one notable deficiency: the creation of a spot bitcoin ETF.
The pursuit of a spot bitcoin ETF has been a considerable endeavor. The SEC (Securities and Exchange Commission) has denied all 33 previous applications spanning across multiple filers ever since the Winklevoss twins first initiated their bid over a decade ago.
However, due to recent developments like BlackRock Inc (BLK) – managing an incredible $8.5 trillion in assets under management (AUM) – joining the fray in June, Grayscale’s court triumph against the SEC rescinding its past application disapproval, followed by the fresh approvals of a leveraged Bitcoin futures ETF and Ethereum futures ETFs, we have come closer than ever.
Further adding to this progress, according to recently disclosed data, BLK has submitted an application for a spot Bitcoin ETF despite unwavering prior rejections from the SEC.
The SEC has previously spurned applications on the basis that Bitcoin’s decentralization and volatility could hinder fund managers from safeguarding investors against market manipulation. Currently, all U.S.-traded bitcoin ETFs are tied to futures contracts traded on the Chicago Mercantile Exchange.
In its application, BLK announced JPMorgan Securities as one of the “Authorized Participants” for its proposed Bitcoin ETF.
U.S. banks like JPMorgan Chase & Co. (JPM), governed by strict regulations, currently cannot hold Bitcoin directly. However, the proposed structural change to spot bitcoin ETFs could alter this scenario. The modification would enable APs to create new shares within the fund using cash instead of strictly relying on cryptocurrency. This paves the way for these regulated banking entities that are unable to hold crypto assets directly.
Authorized participants generally oversee the creation and redemption of ETF shares in the primary market, ensuring the ETF’s price aligns with the value of the underlying securities, in this case, Bitcoin.
Securing authorized-participant agreements is typically straightforward for ETF issuers, yet concerns were raised that bitcoin funds could face challenges due to cryptocurrencies being a relatively new asset class.
If approved, JPM could potentially serve this role for the first such ETF in the U.S., a move anticipated to attract billions in institutional capital and stimulate the cryptocurrency market.
Critics have been quick to note the contradiction in JPM’s involvement, given CEO Jamie Dimon’s repeated criticism of Bitcoin, advocating for a government ban on cryptocurrencies due to concerns over their legitimacy.
However, Bloomberg Intelligence analysts suggest the SEC could approve spot Bitcoin ETF proposals committing to cash-only creations and redemptions, provided there are agreements with authorized participants. They estimate a 90% probability of SEC approval, with several firms expected to launch a spot Bitcoin ETF as early as January.
A spot bitcoin ETF is an investment tool that enables investors to gain exposure to the price fluctuations of bitcoin in their typical brokerage accounts. Unlike derivative contracts, this ETF directly invests in bitcoin as the underlying asset.
APs are economically motivated to leverage arbitrage opportunities in the market, a process involving the trading of ETF shares or underlying securities when minor price discrepancies arise between the two.
In scenarios where ETF shares trade at a premium or discount relative to bitcoin’s actual price, APs step up to either create or redeem ETF shares in larger volumes. This action essentially arbitrages any difference, aligning the ETF share price with Bitcoin’s cost.
Spot bitcoin ETFs present a spectrum of possibilities for both retail and institutional investors looking to speculate on bitcoin. They circumvent the technical complications of managing a cryptocurrency wallet and alleviate security concerns related to the safeguarding of private keys.
The appointment of JPM as an AP could positively influence the bank’s share value, as it demonstrates the bank’s readiness to engage in the burgeoning cryptocurrency sector and opens possibilities for a new stream of revenue via arbitrage and liquidity provision.
Nevertheless, the financial performance of JPM is not solely determined by this engagement. It is also contingent on external factors like the SEC’s verdict on approving the spot bitcoin ETF, the market’s demand and mood toward bitcoin and other cryptocurrencies, and the overall regulatory and competitive landscape of the banking industry. These elements could concurrently sway the stock performance of JPM.
Bottom Line
The potential for a U.S. spot bitcoin ETF cannot be understated, given the vast expanse of the American capital market. According to figures from the SIFMA, American-held assets represent an impressive 40% of total global fixed-income assets and equity market cap. Moreover, ETFs in the U.S. are more prevalent as part of the total asset picture than they are in other regions. They make up 12.7% of the equity assets in America, compared to 8.5% in Europe and 4.4% in the Asia-Pacific.
This equates to a U.S. ETF market valued at around $7 trillion, significantly larger than Europe’s $1.5 trillion or Asia-Pacific’s $1 trillion markets. Judging from another angle, considering that the assets handled by broker-dealers, banks, and registered investment advisors (RIAs) in the U.S. reach into the trillions, a minute fraction of these managed and brokerage assets transitioning into a spot bitcoin ETF could significantly affect the financial landscape.
It’s also worth highlighting that the U.S., according to Chainalysis’s Global Crypto Adoption Index, ranks fourth in crypto adoption. This high level of acceptance might translate well into investment. Banking institution JPM’s openness to engaging with this burgeoning market might lead to advantageous outcomes.
However, prospective investors should consider various additional factors. For instance, JPM’s recent earnings were boosted by Republic’s purchase, an influence expected to wane in upcoming quarters.
Notably, card delinquencies rose in November, potentially impacting both the card business and JPM’s overall financial standing adversely. Commercial R/E, Sovereign Debt, and recession reports add complexity when attempting to reconcile them with JPM’s high stock value.
The bank has recorded two instances of flat dividend growth over the 12 quarters, while inflation rates were significantly high. JPM has not been a reliable dividend growth investment over the past five years, with growth approximating only about 10%.
Investors in search of steady returns may want to tread carefully. JPM’s forward dividend yield currently stands at 2.44%, lower than its four-year average yield of 2.91% and below the 3.32% sector median.
Moreover, the relatively low Price/Earnings ratio of 10.34x suggests market apprehension.
Given this scenario, investors should wait for a better entry point in the stock.

Plug Power Inc.’s (PLUG) shares have taken shareholders on a roller-coaster ride in recent years. Nearly five years earlier, the stock traded for around $1 per share when no one cared much about it. During 2020 and 2021, high investor enthusiasm led to the stock surging above $70. But it has been on a downtrend since then, currently trading under $5.
Shares of PLUG finished at $3.22 on November 10, 2023, their lowest level since April 2020. The company’s shares dived on its “going concern” warning and tax credit fight that could cause its hydrogen industry efforts to go wasted.
The stock has plunged nearly 55% over the past six months and more than 60% over the past year.
Now, let’s discuss the key factors that could impact PLUG’s performance in the near term:
Trembling Liquid Hydrogen Market
PLUG raised a “going concern” warning regarding a severely constrained liquid hydrogen market in North America. The market has been dealing with several frequent force majeure events, resulting in volume constraints, which have delayed Plug’s deployments and service margin improvements.
The hydrogen fuel-cell marker has been grappling with liquidity issues and has lost more than half of its market capitalization since the start of 2023. Plug Power’s 2023 overall financial performance has been negatively impacted by “unprecedented” supply challenges in the hydrogen network in North America.
“The company is projecting that its existing cash and available for sale and equity securities will not be sufficient to fund its operations through the next twelve months,” PLUG said.
PLUG will require additional capital to fund its operations. The company added that it was pursuing various debt capital and project-financing solutions, including corporate debt and a loan program from the U.S. Department of Energy.
Stringent Hydrogen Regulations
The hydrogen producer and fuel-cell maker’s future is heavily dependent on support from the federal government. In November 2023, PLUG was counting on what later turned out to be delayed “government support through a potential loan and clarity on hydrogen tax credits.”
The tax credit could apply to companies, including Plug Power, that use green hydrogen, which is produced by splitting water via electrolysis and could de-carbonize the shipping and heavy industry sectors.
On December 22, the White House unveiled highly anticipated strict hydrogen regulations in support of environmentalists but opposed by business and clean power industry groups. 
Plug Power labeled the new rules on how hydrogen projects can qualify for a tax credit “disappointing” but also expects restrictions around a critical measure of Joe Biden’s signature climate law to get looser once the Treasury Department finalizes them.
“We do expect the regulations to loosen up,” Andy Marsh, president and chief executive officer of Plug Power, said in an interview on Bloomberg Television. “I’ve talked to many senators who tell me it will get easier — not harder.” 
In order to qualify for the tax credit worth as much as $3 per kilogram, hydrogen projects would need to use electricity from newly built clean energy sources and, beginning in 2028, ensure that production occurs during the same hours as those clean sources were operating. The Biden administration is taking public comment on the requirements, which could change before being finalized.  
Marsh, in his interview, said the company’s modeling showed these regulations would reduce U.S. hydrogen output by 70% by 2030. Plug and other hydrogen producers are planning an aggressive effort to “help straighten the regulations out,” he added.
According to Northland analyst Abhishek Sinha, while the policy document has nuances suggesting a possible pathway for PLUG’s plans to qualify for credits, some of its plans could come “under direct scrutiny.”
“Georgia plant could be entangled in additionality factor but PLUG believes RECs (renewable energy credits/certificates) should qualify for PTC,” Sinha added. “Although Texas plant gets power supply from wind farm, the issue for PLUG would be to meet the hourly matching requirements after 2028. NY plant gets hydro power but there is ambiguity around that too in terms of eligibility. All in all, hourly matching is the most concerning factor for PLUG.”
Deteriorating Financial Performance
For the third quarter that ended September 30, 2023, PLUG reported net revenue of $198.71 million, missing analysts’ estimate of $221.73 million. This compared to the net revenue of $157.99 million in the same quarter of 2022. The company’s gross loss widened by 199.5% year-over-year to $137.97 million.
The hydrogen producer’s operating loss came in at $273.97 million, compared to $159.75 million in the prior year’s quarter. Its loss before income taxes worsened by 70.3% year-over-year to $288.21 million. PLUG’s net loss widened by 66% from the previous year’s quarter to $283.48 million.
Plug Power posted a net loss per share of $0.47, compared to $0.30 in the same period last year. This also missed the consensus loss per share of $0.31.
Furthermore, PLUG’s cash and cash equivalents stood at $110.81 million as of September 30, 2023, compared to $690.63 million as of December 31, 2022. The company’s current assets were $2.24 billion versus $3.31 billion as of December 31, 2022.
As of September 30, 2023, the company’s current liabilities increased to $930.59 million, compared to $635.28 million as of December 31, 2022.
“This was a difficult quarter,” CEO Andy Marsh told investors during the company’s earnings call.
“Over the past several months, there have been enormous challenges associated with the availability of hydrogen, primarily due to downed plants, including our Tennessee facility, and temporary plant outages across the entire hydrogen network,” Marsh added. “Additionally, the price of these stations for hydrogen has been over $30 per kilogram at the pump, about twice the normal price.”
Mixed Analyst Estimates
Analysts expect PLUG’s revenue for the fourth quarter (ended December 2023) to grow 82.9% year-over-year to $403.75 million. However, the company is expected to report a loss per share of $0.32 for the same quarter. Also, Plug Power has missed the consensus EPS estimates in each of the trailing four quarters, which is disappointing.
For the fiscal year 2023, Street expects PLUG’s revenue and loss per share to widen 52.9% and 21.6% year-over-year to $1.07 billion and $1.52, respectively. In addition, the company’s revenue for the fiscal year 2024 is expected to increase 56.8% from the previous year to $1.68 billion.
But analysts expect the company to report a loss per share of $0.89 for the ongoing year.
Elevated Valuation
In terms of forward EV/Sales, PLUG is currently trading at 2.90x, 58.6% higher than the industry average of 1.83x. Likewise, the stock’s forward Price/Sales of 2.52x is 73.7% higher than the industry average of 1.45x.
Decelerating Profitability
PLUG’s trailing-12-month gross profit margin of negative 32.84% compared to the 30.28% industry average. Moreover, the stock’s trailing-12-month EBITDA margin and net income margin of negative 92.24% and negative 106.74% are favorably compared to the industry averages of 13.73% and 6.09%, respectively.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 24.57%, negative 11.57% and negative 17.42% compared to the respective industry averages of 12.30%, 7.05%, and 4.99%. Also, its trailing-12-month levered FCF margin of negative 158.88% compared to the industry average of 5.98%.
Rating Downgrades
PLUG’s stock has already been beaten up; however, Morgan Stanley sees more concerns for the clean energy company’s future. On December 6, Morgan Stanley analyst Arthur Sitbon downgraded Plug’s shares to Underweight from Equal Weight and slashed his price target on the stock from $3.50 to $3.
Sitbon added that Plug Power is plagued by “liquidity concerns and worsening hydrogen economics.”
Another Morgan Stanley analyst, Andrew Percoco, sees a “negative risk-reward” for PLUG shares. “Even after the underperformance in 2023, we see significant risk around PLUG’s business model given the operational challenges that the company has faced in commercializing its first few green hydrogen facilities,” Percoco said.
He added, “On paper, PLUG’s strategy makes sense to us, but we have reduced confidence in the company’s ability to execute on that strategy barring a potential dilutive capital raise and a near-perfect execution going forward.”
Analysts at JPMorgan, Oppenheimer, and RBC Capital also downgraded the stock and lowered their price targets.
“While we believe Plug Power can cycle past its current cash flow issues, the current operating and capital markets environments are challenging and we believe PLUG shares are likely to be range bound over the next several quarters until clarity around its balance sheet are sorted out,” said J.P. Morgan analyst Bill Peterson.
The analyst downgraded PLUG’s stock to Neutral from Overweight.
Bottom Lin
PLUG reported significant earnings miss in the third quarter of 2023. The hydrogen fuel cell maker’s higher-than-expected losses were hit by “unprecedented supply challenges” in the hydrogen network in North America. The company further projected its potential inability to fund its operations over the next 12 months amid supply constraints and a severe cash burn rate.
Also, the company will likely be affected by the proposed hydrogen tax rules. PLUG CEO Andy Marsh dubbed the new rules on how hydrogen projects can qualify for a tax credit “disappointing.”
Several analysts downgraded PLUG’s stock and cut their price targets, given concerns about mounting losses, funding requirements, and supply chain disruptions, which have dampened Wall Street’s sentiment about the clean energy company.
Given Plug Power’s dismal financial performance, declining profitability, high cash burn rate, elevated valuation, and bleak near-term outlook, it could be wise to avoid this stock now.