The Bitcoin ETF, the industries first chance of getting real, hard institutional investment on board, or, a chance for institutions to sit and speculate, causing more harm than good.
It’s an argument that is cropping up all over the cryptosphere, one expert, the author of ‘Mastering Bitcoin’, Andreas Antonopoulos, has weighed in with his view that institutions could use ETF’s to actually speculate to a point that they are able to manipulate stock and prices.
The premise of an ETF is that it will allow big investors to trade cryptocurrencies in the same way they currently trade stocks. The ETF holds the cryptocurrency for the investor, meaning the investor is able to buy and sell without actually handling the Bitcoin. The ETF’s share of the money then gets traded on traditional stock exchanges. As investors don’t actually hold the Bitcoin, they are able to speculate on a huge scale, this in turn will allow price movements to become far more sensitive to the actions of those involved in the ETF.
According to Coinspeaker:
“Such situations expose the market to manipulation by market makers. Antonopoulos says that this could turn out to be a terrible thing for the digital currency in the long-run. He says that the Bitcoin ETF could be bad for the digital currency as it would create a pseudo-centralization into the crypto-ecosystem. He says that investors would shed away from their responsibilities of holdings keys and will, in turn, play no part in the decision-making process in the crypto-ecosystem. This could also possibly lead to the centralization of the power, of the Bitcoin network, in the hands of custodians. He believes that in the long run, this could prove to be detrimental to the very ‘decentralized’ nature of the digital currency.”
Antonopoulos himself adds:
“ETFs fundamentally violates the underlying principle of peer-to-peer money, where each user is not operating through a custodian but has direct control of their money because they have direct control of their keys”.
Indeed, Antonopoulos does believe that the acceptance of a Bitcoin ETF will be a very big deal and will create a huge buzz through the markets. By opening up to institutional investors, Bitcoin will reach mainstream news again and Antonopoulos expects to see a similar reaction to this, as we did in the cryptocurrency boom of 2017 and 2018 after the approval of Bitcoin Futures Contracts.
But, in the long run, after this buzz dies down, the markets will become more volatile and more susceptible to manipulation from the institutional investors that jump on board as a result of a Bitcoin ETF.