Fears have been made by experts about the possible approval of a spot Bitcoin exchange-traded fund (ETF) in the US. For example, Josef Tětek, Trezor’s Bitcoin analyst, is unhappy about this.
TĻtek says that the addition of spot Bitcoin ETFs might be different from what Bitcoin’s author, Satoshi Nakamoto, had in mind when he first thought of the idea. A spot Bitcoin ETF is meant to be a financial product that tracks the price of Bitcoin by holding real Bitcoin. However, it goes against the idea of self-custody, which is one of the most important ideas in the cryptocurrency world.
Self-custodial crypto storage options, on the other hand, let users really own their Bitcoin because they hold the private key and the assets themselves. Tětek stresses that spot Bitcoin ETFs could make people less likely to hold their own bitcoin, which could put the whole system at risk, even though these ETFs might seem safer at first glance than standard exchanges.
TĻtek says that one possible outcome is that large amounts of Bitcoin will gather in central places where they can be seized by the government, similar to how gold was seized in the US in the 1930s. TĻtek questions the need for spot Bitcoin ETFs, saying that while they make it easier to be exposed to changes in the price of Bitcoin, these changes can already be exposed through normal buying Bitcoin.
TĻtek also brought up a big concern:
ETF users don’t have many ways to get their money back. Instead of letting users take out the base asset, ETFs hold all of the assets together. This makes the idea of uncontrolled printing of “paper Bitcoin” that isn’t backed by Bitcoin more dangerous.
This kind of unbacked Bitcoin could mess up real markets and lower the value of real Bitcoin, all while giving more power to big banks—the exact opposite of what Satoshi had in mind when he first came up with the idea.
Some experts are still guarded, even though the market is becoming more positive as people expect U.S. securities regulators to approve a spot BTC ETF in January 2024. Arthur Hayes, one of the founders of BitMEX, says that spot BTC ETFs that do well could “completely destroy” Bitcoin. Also, the fact that ETF fees are likely to be lower than exchange fees makes the possibility of competition with centralized crypto platforms like Coinbase a worry.
I worry about these things, but not everyone does. As the founder of Quantum Economics, Mati Greenspan doesn’t see a direct clash between self-custody and spot Bitcoin ETFs. He says that regular investors who can choose self-custody may still choose it over ETFs. ETFs, on the other hand, might be more appealing to companies that can’t hold their own funds.
According to Greenspan, there are no benefits and many risks for small investors to own Bitcoin ETFs. He suggests that buyers should instead buy Bitcoin directly.
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