Bitcoin ETF: A Short Story
In the next week or so, Bitcoin will reach a massive milestone in its 14-year life. It will be the foundation for Wall Street’s latest gambit, a highly anticipated Bitcoin ETF (that is, Exchange Traded Fund).
“An exchange-traded fund is a type of pooled investment security that will track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can”- Investopedia
Think of investing in gold. You could purchase physical gold coins or bars and keep them safe at home dealing with the risk of them being stolen, or you could simply trade a gold ETF that tracks the price of the yellow metal without said risk of theft or the additional risk of fire or loss. The case for a Bitcoin ETF is even more compelling.
Today, if you want to buy Bitcoin you’d need:
- An account on a broker like Coinbase
- To jump through hoops getting your bank to approve transactions with said broker
- To decide whether you leave your BTC on this exchange (highly vulnerable to being hacked) or keep it on a hot or cold wallet
- If option 2 is chosen, Learn the difference between a cold or hot wallet & what a seed phrase is
- Learn how to send crypto from your account on Coinbase to your wallet with the Bitcoin ‘Address’
- To painstakingly check the address 5 times over & fret over whether that’s an ‘o’ or a ‘0’
- To spend the next hour in complete panic whilst the transaction validates (during this your money is effectively in limbo)
This is the reason why up until now as far as I can see Bitcoin is the domain of two groups of (mostly male) people: Geeky computer enthusiasts who have been in Bitcoin since the early days, and risk-seeking guys looking for a quick 100x on their investment after seeing the former geeks earn a cool 1000x on their money. (This ‘x’ notation means if you invested $5, you’d be sitting on $5 x 1000 = $5000). To invest in Bitcoin today means accepting more financial risk than any other traded asset on the market (its price is extremely volatile), plus the additional risk of forgetting your seed phrase, sending your bitcoin to the wrong address, having your account hacked and wallet emptied or a whole host of other possibilities. This is why your auntie and your college professor laugh you out of the room over your idea to invest in Bitcoin. Judging by the amount of horror stories you hear, they’re not exactly wrong.
That brings us to the SEC’s January 10th deadline for Bitcoin ETF approvals with some of the biggest names in finance: BlackRock, Vanguard, and more than 10 others. If approved, this is the moment investing in Bitcoin goes from pure ball-ache to no-brainer, as you’ll be able to trade ‘paper Bitcoin’ on the regular broker you’re already accustomed to without needing to understand the first thing about Bitcoin, cold wallets, or seed phrases. It’s the moment that everyone's financial advisor and pension fund manager starts dialling them up with the “The only problem you’re gonna have, is that you didn’t — buy — more” (I’m looking at you, Wolfie). It’s the moment people have their perception switched by Wall Street & the City of London from “It’s a scam” to, “It’s the best-performing asset on the market & should form 1% of your portfolio”.
Maybe it’ll fall on deaf ears because of the years and years of smearing that Bitcoin & Crypto have endured from the mainstream media, who knows? But what I do know is that the weasels on Wall Street are experts at crafting compelling investment theories for their customers. They know exactly what needs to be said to maximise their commissions for the quarter to buy another house in the Hamptons.
How this will affect the price of Bitcoin itself is anybody’s guess, but the crux of the matter is this. Up until now, Bitcoin has been for the few. This committed group of geeks and WSB Bros have taken it to an eye-watering high of $68k without the liquidity of a single regulated large-cap financial institution. The Bitcoin ETF promises to attract a new wave of capital from pension funds, hedge funds & banks globally. This is the equivalent of bringing a rocket launcher to a wooden sword fight.
Since the talk of the ETF began and after seeing story after story of people using Bitcoin to escape economic sanctions or hyperinflation I am reticent to say Bitcoin will hit $1 Million per coin at some point in the next few years, save a solar flare or complete societal collapse. Reticent as I still kick myself for not being more curious when my classmate was talking my ear off about a mysterious “online currency” in an IT class in 2014. Oh well, there’s always Gamestop I suppose…
