Bitcoin advocate Andreas Antonopoulos offered his opinion on Bitcoin ETFs in a rather foreboding video released on August 14.
He first explained the concept of an ETF or exchange-traded fund as a fund that has a custodian or manager that creates a special financial instrument that is similar to a stock. In the case of Bitcoin ETFs the instrument is a fund that holds Bitcoin and sells shares in a bitcoin reserve that represents the price of bitcoin as a stock that can be traded through regular brokerage accounts on the stock market.
The custodian holds the actual Bitcoin and the customer buys a share in the funds without having to navigate the often rigorous and complex process of registering for cryptocurrency exchanges, completing KYC, and familiarizing themselves with encrypted keys and wallets.
The cryptocurrency space has lauded the inevitable arrival of ETFs as a crucial event that will greatly increase the market cap of cryptocurrency and essentially save cryptocurrency investors and traders from the current bear market, taking cryptocurrency to the next level as a financial market. In his video Antonopoulos outlined in no uncertain terms what he sees as the dangers of Bitcoin ETFs, citing the market manipulation that took over the price action of gold as an example.
“I’m going to burst your bubble. I know a lot of people want to see Bitcoin ETFs because ‘lambos’ and ‘to the moon’ and all that. I think it’s a terrible idea. I still think it’s going to happen, but I think it’s a terrible idea. I’m actually against Bitcoin ETFs.”
Apart from the potential of increased market manipulation by major market makers as is seen in the commodities markets, Antonopoulos is concerned over the issue of consensus.
Bitcoin holders essentially have the right to vote on certain issues based on which exchanges they choose to trust their coins with, which fork they support, etc.
“If there is ever a fork debate, which is very likely to happen again in any cryptocurrency, then the fund that controls that Bitcoin now has a very large voice. Their shareholders don’t. They don’t get to choose which fork the fund is going to follow in a Bitcoin debate…
We already saw that level of influence during the August 1st fork, user activated software forks, Bitcoin cash, the scaling debate… Large custodial exchanges had a very strong voice in the ecosystem. They were able to decide if they were going to support or not on behalf of 10 million customers… an ETF will do that and it will do that on an even bigger scale”
Centralized fund managers having millions of votes in the Bitcoin ecosystem allowing for manipulation in price action, scaling debates, and forks is the main concern for the Antonopoulous who foresees disagreements over forks between major ETFs leading to splits forming currencies akin to “corporate Bitcoin.”
In a situation where authorities are pressuring the community to make Bitcoin less private and more transparent, it could be the case that an ETF would feel obliged to comply with the regulatory pressure and refuse to adopt privacy measures, creating a separate, corporate Bitcoin market.
The prominent Bitcoin advocate’s views were mirrored by former Wall Street executive Caitlin Long in a CCN interview in which she denounced the involvement of Wall Street financialization in the crypto space due to the bad practices it would inevitably bring.
Featured image from Wikimedia.
Last modified: May 20, 2020 6:05 PM UTC