Bitcoin enthusiasts are declaring a historic victory after US regulators approved a new, more accessible way for people to invest in crypto assets after a decade of resistance. Yet they don’t come close themselves.
On January 10, after a farcical false startthe US Securities and Exchange Commission approved the launch of spot bitcoin exchange-traded funds (ETFs) in the country. The ETFs will be issued by a selection of major financial institutions – including BlackRock, Fidelity and Franklin Templeton – and will give people a way to invest in bitcoin through a brokerage, as if it were a stock. The price of the ETF shares will follow the price of bitcoin.
The arrival of the new ETFs was broad celebrated by bitcoin investors, who believe they will legitimize the assets in the eyes of wealthy institutional investors and make it easier for laypeople to invest, increasing demand and driving up the price. The tricky point is that spot bitcoin ETFs are at odds with pretty much everything bitcoin is supposed to stand for.
In their 2008 white paper, bitcoin’s pseudonymous inventor Satoshi Nakamoto outlined a vision for electronic money that passes directly from person to person, under the control of no financial institution. It was two fingers to profit-hungry Wall Street. Still, the ETFs will be issued by some of the largest financial institutions in the US. Also, investors do not own or hold real bitcoin; they buy representation. ETF investors may “reap the financial benefits, but won’t get all the benefits Satoshi envisioned,” says podcast host Peter McCormack What Bitcoin Did. “True ownership of bitcoin involves direct ownership.”
In the weeks after launch hundreds of millions of dollars spot bitcoin ETFs are expected to flood in. The result will essentially be a split of the assets into a form of bitcoin for investment and a bitcoin for bitcoin’s sake, which is only in the hands of ideologues.
To explain the dissonance between the new ETFs’ celebratory reception and their blatant incompatibility with the Nakamoto ethos, bitcoiners point to the difficulty in achieving widespread adoption thus far. The ETFs are a calculated compromise, they say, that addresses ordinary people’s reluctance to deal with the crisis hazards of storing crypto yourself.
The ETFs will have a “mosquito effect,” says Max Keizer, who advises the government of El Salvador on bitcoin policy, “spreading the ghost virus of bitcoin far and wide.”
The attitude of crypto companies, especially those supporting the ETFs with services, is that an increase in the profile and mainstream adoption of crypto, in whatever form, will be beneficial to the long-term health of the sector, following a long series of problems. reputation setbacks.
“ETFs are just a form of distribution,” said Marshall Beard, chief strategy officer at Gemini, a crypto exchange that stores bitcoin on behalf of ETF issuers. While investing in bitcoin through an ETF is not functionally identical to storing one’s own bitcoin, he says, the new funds will target an underserved demographic for whom ease of access is the priority. “It is not necessarily that one model is better than the other. It’s just different,” he says.