Billion-Dollar Inflows into Bitcoin ETFs Raise Concerns of Centralization Among Crypto Executives
Summary:
The launch of U.S. spot Bitcoin exchange-traded funds (ETFs) attracted billions of dollars in the first week, showing high demand. However, crypto executives have raised concerns, arguing that ETFs contradict crypto's original principles. They warn that these ETFs might lead to increased centralization, with Wall Street institutions potentially owning most of the available Bitcoin. The executives believe that future developments, particularly in self-custody wallets, could eliminate the need for ETFs.
The initial week of trading in U.S. spot Bitcoin (BTC) exchange-traded funds (ETFs) attracted billions of dollars, but crypto executives are questioning these instruments, stating they contravene the core principles upon which cryptocurrency was established. The U.S. Securities and Exchange Commission (SEC) greenlit numerous spot Bitcoin ETFs for the initial time on Jan 10, triggering trading on Jan 11. The high trading volumes - totaling $10 billion within the first week - illustrated huge existing demand for these products, and the Bitcoin ETF market received over $782 million in capital inflows within the first two days of trading. Despite this, crypto industry leaders caution that ETFs could enhance centralization in cryptocurrency and might not be necessary in the future.
Andy Bromberg, CEO of wallet developer Eco, spoke to Cointelegraph, asserting that ETFs could afford conventional financial institutions too much sway over the market. Bromberg believes that in purchasing Bitcoin ETFs, investors are essentially allowing Wall Street to buy Bitcoin on their behalf, with investors owning certificates rather than actual Bitcoin, an approach which he feels counteracts the foundational principles of Bitcoin. He warns that if investors prioritize price over an understanding of the technology, Wall Street institutions could end up owning the lion's share of available Bitcoin, a circumstance that disrupts the initial vision for Bitcoin.
Bromberg labels Bitcoin as "remarkable" but criticizes the Bitcoin ETFs for stripping away its unique qualities and leaving only its price. Nonetheless, he acknowledges the approval of the ETFs, agreeing with SEC Commissioner Hester Pierce that this allows Americans to express their views about Bitcoin within financial markets. However, he contends that the crypto sector faces a critical moment following these approvals - if it can't guide new investors towards self-custody of their funds, Bitcoin may morph into a financial asset much like any other, dominated by Wall Street, undermining its original intention.
Lucas Henning, the Suku wallet development team's CTO, also criticises Bitcoin ETFs. Henning feels these will only capture public attention temporarily as the SEC is unlikely to approve for ETF inclusion most cryptocurrencies and protocols besides Bitcoin. According to Henning, the SEC's approval of Bitcoin ETFs following a protracted legal tug-of-war, accompanied by swift reassurances that other cryptocurrencies will not necessarily garner the same treatment, signifies that majority of the crypto market yield won't be accessible via conventional broker accounts.
Henning also claims that technological advances, particularly within the Ethereum space, will soon make self-custody of crypto assets simpler than ever, reducing the need for ETFs. He cites Ethereum Improvement Proposal (EIP) 7212, facilitating transactions using biometric data like facial recognition, therefore making self-custody wallets as user-friendly as brokerage accounts. Henning believes this technological shift will decrease interest in crypto ETFs as users won’t require them for crypto custody. The narrative around ETFs has seen divergent opinions amongst industry experts, with some dubbing these funds as "revolutionary" whereas others dismiss them as insignificant.
Published At
1/19/2024 5:42:43 PM
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