Reasons Why Even The Most Supporting Players Of Crypto Don’t Want Bitcoin ETF Approval
Reasons Why Even The Most Supporting Players Of Crypto Don’t Want ETFs
Cryptocurrencies have come a long way since Bitcoin was first introduced. Today, over thousands of diverse currencies exist with quite a chunk succeeding over others. In an attempt to help stabilize the crypto market, experts have proposed the need for exchange-traded funds (ETF), which also is trusted to bring in institutional investors along with their money.
Interestingly, not all crypto supporters are for ETFs. Some supposedly argue that its existence might be ideal for exposure purposes only, while others disregard the idea because of its possible centralized manner.
Recently, news outlet, Coin Desk, shared an interesting post on a list of reasons why ETFs aren’t always preferred (https://www.coindesk.com/bitcoiners-bitcoin-etf-crypto). This list seems to reflect the viewpoints of several leaders who also have been vocal about ETFs and their lack of need. Here is the breakdown of what was originally shared:
#1 Possible Existence Of Centralization
The first argument many have in relation to ETFs, as previously mentioned, has to do with it posing a risk or contradicting cryptocurrencies’ notion of a “peer-to-peer system”.
According to the Developer of Lightning Labs, Alex Bosworth, those managing ETFs seem to run solo in the sense that they make all of the decisions for their clients, which defeats the overall purpose. In particular, he said:
“We saw companies that are custodians for other people’s coins […] take actions that decide on behalf of their users, without even consulting them […] We don’t want to have central parties out their negotiating for fundamental rule changes in bitcoin.”
Christopher Allen, who according to Coin Desk supports Bitcoin, also agrees with Bosworth, adding that ETFs are encouraged as a mean to make money off of interest rates.
As per bitcoin analyst, Nik Bhatia cryptocurrencies are slowly developing into a “trusted custody model,” however, he is certain that those who are trading cryptos on their own will not see need for such a service.
#2. Too Many Getting Hopes Up Because Of ETF “Benefits”
While the idea of ETFs has been assumed to help the cryptocurrency market recover, many experts don’t see it happening to a large extent, but rather a small one. Founder of Bitcoin Advisory LLC, Pierre Rochard was quoted saying the following:
“[…] A very niche part of the market would be interested in a bitcoin ETF product. It would be even less than gold is used in an ETF because the overall settlement cost of bitcoin is lower than those physically settling gold.”
This seems to be supported by BlockTower Capitals CIO, Ari Paul who believes the existence of ETFs will get a conversation started along with calculations on its profitability, but not actual people investing in it right away.
SEC Commissioner, Hester Pierce has also been previously quoted telling people to be cautious of ETFs even if they are approved.
#3. Effects Of Forks On ETF Custodians Remains A Question
Rochard once again seems to have the right questions that make investors reconsider ETFs. In particular, he was quoted by CoinDesk asking the following:
“Do they [ETF custodians] give the coins back to people or do they suddenly become an index fund? I don’t think there’s a precedent at all [from capital markets], because bitcoin doesn’t have a legal identity and corporations do.”
Allen was quoted on the overall process of ETFs and how clients should be made aware of them in order to avoid assets from being excessively loaned out (i.e. rehypothecation).
Overall, it seems like experts are not entirely convinced by the existence of ETFs. This is not to say that they all oppose it, as many consider its presence as a new branch of exposure to cryptocurrencies – considering that the entirety of the market fails on the need to educate consumers altogether. Also, many are aware that ETFs can make a slight difference, which at this very moment can be healthy for the market.
After reading the opposing viewpoints on ETFs, are you certain on your current stance? Let us know why/why not in the comments below!