It’s Embarrassing How ETF is The Only Hope Bitcoin Has
What is the purpose of Bitcoin today?
On a typical uneventful bear market day, crypto folk are surprised by the sudden 5% Bitcoin price jump. The digital gold wicked to $30,000, and people rejoiced. We had been wondering when the bull market was back. Was it finally the time?
A tweet by CoinTelegraph gave a hint about what the commotion was about.
However, before everyone had the time to celebrate (and save their short positions from getting liquidated), it was revealed that the news was fake. NO BITCOIN ETF approved. BTC price immediately retraced. Excited people who longed at the top got rekt.
The bear market then resumed solemnly.
The irony of what happened
While other people raged toward CoinTelegraph for the market manipulation, I stood in the background chilling. Not just because the market had just given me a good short entry,
But also because I recognize something funny.
Is the ETF what Bitcoin is all about now?
Bitcoin ETF has long been believed to be the major catalyst that could send crypto into a new, fresh, and sporadic bull market. Almost everyone believes it — a consensus. Industry advocates have spent a lot of money and resources on lobbying, lawsuits, and other types of campaign efforts for the Bitcoin ETF to even get an ounce of consideration from the regulatory body. It is almost pathetic — the validation seeking.
The spot ETFs are seen to be the gate for mainstream adoption of Bitcoin. A publicly traded ETF is how you get boomers and their pension funds to buy Bitcoin, in a way that is approved by the dear leader SEC. Imagine the money, the TradFi inflow, or the broader retail participant. This is why the market reacts sensitively whenever crucial news about the ETFs comes out.
This whole situation is embarrassing, because it shows, other than ETFs, Bitcoin really doesn’t have any other ‘narratives’ to support its continuity. It also begs questions, about whether the ETF will work like people hope (in pumping the price), and what’s the plan afterward.
Would a spot ETF really pump Bitcoin price?
A Bitcoin ETF will have a different structure from the current Trust model like the current Grayscale Bitcoin Trust (GBTC). A Bitcoin spot ETF, if it were to exist, would be traded on major stock exchanges like the NYSE or NASDAQ, making them more accessible to a broader range of investors.
So, in a way, yes, more people would buy. However, we need to consider the current market situation of custodied BTC.
Investors waiting to cash out
The reason why investors chose GBTC over the real BTC, the coin — to the point that some got rekt like 3AC — was because it provides a tremendous arbitrage opportunity.
For years, GBTC investors have been buying and owning Bitcoin far below their market value. The peak was around a year ago when you could buy BTC at a 50% discount through GBTC shares.
These investors won’t plan to hold their GBTC forever or diamond handing like the maxi would advise. Not when they suddenly have the opportunity to convert the BTC into real BTC which is worth twice what they initially bought. They have been waiting to cash out bigly upon the conversion to the ETF. Also, we haven’t considered those who bought it more expensively before 2021 and now are currently bagholding.
Thus, the spot ETF has selling pressure coming from this party:
- The arbitratgoor.
- The bagholder.
GBTC holds $17 Billion worth of BTC in its custody, according to its official website. That is a thrice selling pressure than the $5 Billion BTC currently owned by the US government. It is certainly something to consider. Especially when there’s no other narrative supporting Bitcoin other than the ETF and the halving.
An ETF, but still no new use case
A spot ETF will not add any more use cases for Bitcoin, which people have already used as a speculation tool.
Early this year, we saw the rise of Ordinals, an NFT-like ‘inscription’ on Bitcoin. Ordinals prove that you can use the BTC network to store immutable data aside from transaction data. However, Ordinals aren’t speculative-able. Its use case is more for digital activism, such as inscribing infamous war log to avoid censorship. Beyond that, Ordinals don’t give an opportunity for profitable endeavors.
A new risk coming from ETFs
An ETF won’t promote self-custody too. Similar to GBTC, the coins on the ETFs would be held in the custody of the ETF issuers. ETFs will introduce another risk — the custodian risk.
It’s not like people have already been wondering whether there’s a real BTC behind every GBTC share. Grayscale Investment and its founder Barry Silbert are in the middle of various financial feuds and woes with several problematic parties. Rumors on the street that the company lost a lot of money tangled itself with 3AC and FTX. Barry could be the next “main character” after FTX’s SBF.
I personally think it’s a mistake people put too much hope on the ETFs. Like with everything in the market, consensus takes are often the wrong takes.
It’s also embarrassing for Bitcoin as the technology itself. It feels like Bitcoin has peaked, and no other function it serves as the speculation tool. People are not interested in campaigning it as a tool for the good of humanity. There’s simply no money in that. On the other hand, Bitcoin is simply an inefficient day-to-day payment tool.
So, we all hope for ETFs now.
After the ETF, then what? Do people not think that far ahead as long as they find their next exit liquidity? The future of Bitcoin remains in the fog.
Friend.tech: https://friend.tech/ann0x_t (You can also find me on Farcaster, Mirror, and DeBank stream. I’m currently exploring various web3 socials platform.)