The US Securities and Exchange Commission (SEC) has approved the creation of spot bitcoin exchange-traded funds (ETFs). The decision, announced on January 10, represents a milestone in the history of cryptocurrencies, with many Bitcoin enthusiasts celebrating the new products. However, they themselves will not come near such products.
Bitcoin ETFS will be issued by reputable financial institutions such as BlackRock and Fidelity, providing investors with a more accessible and trusted path to enter the bitcoin market.
Unlike direct investments in bitcoin, which require a certain level of technical knowledge and willingness to manage security risks, ETFs offer investors the opportunity to buy shares representing the value of bitcoin through traditional brokers, similar to buying shares in companies .
The Bitcoin community received the news with enthusiasm and saw it as an opportunity to further legitimize the cryptocurrency in the eyes of institutional investors and the general public.
ETF is not Bitcoin
Many believe that this new investment opportunity could increase demand and consequently increase the price of bitcoin. However, great caution is required during this celebration.
The essence of Bitcoin, as described by its enigmatic creator, Satoshi Nakamoto, was to be a peer-to-peer electronic cash system that operated outside the control of financial institutions.
However, ETFs represent an irony in relation to this ethos, as they are products created and managed by some of the largest financial institutions in the US.
For analysts like Peter McCormack, host of the podcast “What Bitcoin Did,” ETFs offer a watered-down form of the Bitcoin experience.
Investors gain exposure to the cryptocurrency’s upside potential, but miss the opportunity to “own” Bitcoin in the purest sense as outlined by Nakamoto, he says.
This raises questions about the nature of ownership and control in a world where cryptocurrencies are becoming increasingly institutionalized.
The arrival of ETFs could also lead to a conceptual split of Bitcoin: on the one hand, Bitcoin as a mainstream investment asset, represented by ETFs; and on the other hand, ‘pure’ Bitcoin, which is held and traded directly by individuals who adhere to the original principles of cryptocurrency.
This division reflects a calculated compromise within the community, where some see ETFs as a necessary evil to promote widespread adoption, despite moving away from Nakamoto’s original vision.
Bitcoin pioneers like Max Keizer, who advises the government of El Salvador on Bitcoin policy, see ETFs as a “mosquito effect,” spreading Bitcoin’s influence more widely.
However, this ease of access comes at the cost of greater institutionalization and possibly regulation.
Marshall Beard, strategy director at Gemini, said ETFs meet a market need and offer a more accessible path for those who have previously hesitated to enter the world of cryptocurrencies.
This indicates recognition by financial institutions of Bitcoin’s growing importance in the global economic scenario.
Brett Tejpaul, head of institutional services at Coinbase, the largest exchange in the US, suggests that the coexistence of different ways of interacting with Bitcoin could be beneficial, allowing different strategies and preferences to coexist harmoniously.
Bitcoin vs “Bitcoin”
A possible consequence of this fork is divergence in Bitcoin prices. Samson Mow, CEO of JAN3, a company focused on Bitcoin technology, speculates that we could see a discrepancy between the price of Bitcoin held by financial institutions and Bitcoin traded directly between individuals.
He predicts that Americans may prefer the convenience of ETFs, and will choose to include them in their retirement plans rather than deal with owning Bitcoin outright. This could result in a large amount of Bitcoin being held in institutional custody, potentially subject to stricter regulation.
The change could have far-reaching consequences, both for Bitcoin’s price and its use and perception. ‘Institutional Bitcoin’ could be in a closed trading system, while ‘free Bitcoin’ could trade at a premium due to its limited availability and adherence to the principles of financial freedom and autonomy.
The approval of Bitcoin ETFs in the US is a turning point for cryptocurrency. While it offers the potential for wider adoption and an increase in the asset’s value, it also raises questions about the nature and future of Bitcoin.
To some, it represents a regrettable departure from Nakamoto’s original ideals. For others, it is a practical and necessary step to make Bitcoin mainstream.
What is clear is that this evolution of Bitcoin reflects the ever-changing dynamics of the cryptocurrency world and the ongoing search for balance between decentralized ideals and the realities of the traditional financial system.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
