Why Satoshi Nakamoto would be disappointed about people investing in the Bitcoin ETF
Missing the point about the creation of Bitcoin
It is now clear that investment banks, governments, and public and private companies have developed an interest in Bitcoin. The narrative that Bitcoin is environmentally harmful has also changed by now. It is known to many that the network is powered by over 50% renewable energy that cannot be used elsewhere at the moment. This encourages the expansion and use of renewable energy in general.
It is quite interesting that many are now listening to the banks in regards to Bitcoin. In 2017, Larry Fink, the CEO of BlackRock, had still called Bitcoin an index for money laundering. Now, on the other hand, he is talking positively about Bitcoin and is even applying for an ETF at the SEC.
Currently, a lot is revolving around the approval of the Bitcoin Spot ETFs that have been applied for. A Bitcoin Spot ETF would mean that the issuer of the ETF would have to physically buy the Bitcoins on the spot market to cover it. The firms that have applied for an ETF include very large investment banks such as BlackRock, Fidelity, Franklin Templeton, Deutsche Bank, Citadel, Charles Schwab & Nomura. These firms collectively manage approximately $25 trillion. If the ETF applications were approved, this would lead to a huge demand for Bitcoins. Of course, these firms do not buy the Bitcoins all at once and also not directly via the spot market, but via so-called OTC (Over The Counter) trades in order not to distort the market price. But this will lead to an increase in the Bitcoin price via secondary effects both from a behavioral finance point of view and when the first investors invest in the ETFs.
The increasing demand from large investors will lead to a higher acceptance of Bitcoin. Bitcoins are still viewed very critically by the public. Most still do not understand what is great about Bitcoins. This will change through the ETFs. Of course, I would rather see the increasing acceptance of Bitcoin among the population, who understand why a deflationary decentralized money makes so much sense, than the increasing demand from the big banks and states. However, life is not a wishful thinking concert.
Not your keys, not your coins
These banks already control and influence enough of the financial market and Bitcoin was created to be a counterweight, a hedge against the banks failing again. The Genesis Block, the first Block that was mined, plays on this. The Genesis Block states in its first transaction:
“The Times 03 / Jan / 2009 Chancellor on brink of second bailout for banks.”
This plays on the bank bailout that Satoshi Nakamoto strongly criticized. The banks failed us in 2008. They constructed securities like synthetic collateralized debt obligations and went broke with them. The banks were saved at the expense of the general public.
Satoshi made Bitcoin as something that can’t be controlled by big corporations, governments, and central banks.
“You will not find a solution to political problems in cryptography.
Yes, but we can win a major battle in the arms race and gain a new territory of freedom for several years.
Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.”
If you want an asset that can’t be controlled by anyone, I think Bitcoin is the way to go right now.
From the investor’s point of view, I also don’t understand why someone would choose to invest in a Bitcoin ETF rather than directly buy Bitcoins. An ETF is a suitable financial tool to invest in a market or industry and thus diversify the risk. However, in a Bitcoin ETF, you would only invest in bitcoin. That would not be diversification. In addition, one would not own the keys to the Bitcoins and would therefore not have any control over the Bitcoins. To me, this means that the risk of owning shares in a Bitcoin ETF is higher than that of owning just Bitcoins because there is an additional third party involved. In addition, you would lose all usability of a Bitcoin. This means people who invest in an ETF see Bitcoin purely as an investment. One would be completely at the mercy of the system in case of a financial crash.
Hence, a Bitcoin ETF and investing in it is a contradiction in itself.
Buying a Bitcoin ETF is like buying Starbucks Stocks and expecting you can drink it.
However, it would make sense to have an ETF for Altcoins. For instance, these could be structured by use case, like an ETF for Defi-Coins. This would significantly reduce the investment risk in Altcoins.
Follow the big and smart money
So, what can we expect and do about it? In my opinion, the ETFs can no longer be stopped. There are too many applications for an ETF. The pressure on the SEC is increasing immensely. I am currently assuming approval in 2024. Most likely just before the next Bitcoin halving.
In general, I always try to do what the big and smart money does. In terms of the Bitcoin ETF, this means that I don’t buy the product that the banks want to sell me, I buy the product that the banks buy. In this case — Bitcoin. I would rather own real gold, real oil than just some security which affirms that I own such commodities. You can never be sure, if the security is 100 % backed by the underlying asset.
In the background, investment firms are already taking advantage of low prices to accumulate Bitcoins. One should always keep in mind that these companies buy at low prices and do not sell. So, if another piece of catastrophic news should cause the price to drop, I will buy.
I hope I was able to make clear through this article why it is better to invest directly in Bitcoin than through an ETF.
What are you going to do?
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Disclaimer: The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial, legal or tax advice. The content of this text is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. The author does not guarantee any particular outcome.
