Launch of spot Bitcoin ETFs will lead to creation of unbacked BTCs
Launch of spot Bitcoin ETFs will lead to creation of unbacked BTCs
The SEC's potential approval of spot Bitcoin ETFs, which could come as early as January 10, 2024, would create fundamental problems for mainstream cryptocurrency in the United States.
In fact, Bitcoin will no longer live up to the original vision of its creator, Satoshi Nakamoto. This opinion was expressed by Josef Tetek, a crypto analyst at Trezor.
Tetek shared his concerns that the concept of a spot Bitcoin ETF as one of the BTC products contradicts the idea of self-custody.
As originally conceived, Bitcoin is the property of the user, who independently accumulates and stores the cryptocurrency in storage wallets and personally takes full responsibility for the safety of the private key.
"Spot Bitcoin ETFs as an investment product are different from the self-custody approach and could lead to the emergence of unsecured BTC as it will be more attractive to investors than exchanges," Tetek said.
According to Cointelegraph, the analyst believes that a possible consequence of the introduction of a spot Bitcoin ETF is that a significant portion of BTC assets will be accumulated in centralized locations, meaning that the government will be able to confiscate them.
Josef Tetek explained, "Bitcoin ETFs make it easier for both retail and institutional investors to access Bitcoins. At the same time, buying Bitcoins the traditional way carries the same risks. Is it worth using ETFs for this purpose?
The expert also fears that there will be another important problem with the spot Bitcoin ETF. It has to do with the fact that ETF holders will not be able to withdraw the underlying asset. That is, the owner of the assets is the ETF, not the investor, which increases the likelihood of uncontrolled issuance of "unbacked Bitcoins". This is a key difference from the real digital currency, which is limited to 21 million coins.
"The result could be the creation of millions of unsecured Bitcoins. This could also reduce the value of real Bitcoin. In addition, a Bitcoin ETF would give regulators more leeway than in traditional finance. The complete opposite of Satoshi's original vision."
Tetek's concerns about the inconsistency with the idea of self-custody of BTC point to potential problems with the Bitcoin ETF amid the general euphoria in the market over the imminent launch of the new crypto product. Most experts are already optimistic about Bitcoin's growth prospects, as they are confident that the U.S. regulator will approve a spot BTC ETF before January 10, 2024.
However, not everyone is optimistic about spot BTC ETFs. Some experts, including Arthur Hayes, director of BitMEX, or Nick Carter, founder of Castle Island Ventures, believe that spot Bitcoin ETFs could "completely destroy" Bitcoin. Bitcoin ETFs will be able to compete with centralized cryptocurrency exchanges like Coinbase because they will offer lower fees than exchanges, they explain.
However, there is no direct conflict between self-custody and spot Bitcoin ETFs, according to Mati Greenspan, founder of Quantum Economics, because retail users will stick with self-custody. "For retail investors, there's no advantage to owning Bitcoin ETFs; it's much better to just hold Bitcoins," he said.
Further reading: MicroStrategy anticipates the imminent rise of Bitcoin and buys 14.6k BTC.
