CoinList founder Andy Bromberg argues that spot bitcoin (BTC) exchange-traded funds (ETFs) are nothing more than “diluted cryptocurrencies” and a sign the sector is headed in the wrong direction, amid growing commotion over the possible approval of an ETF in the United States.
Bromberg, who is also CEO of wallet app Beam, told Cointelegraph: “If a bitcoin ETF is considered crypto, we have failed as an industry.”
He said a bitcoin ETF would “absolutely” be a net positive for crypto adoption, but claimed the space’s success comes from helping people self-custody assets and decoupling from the traditional financial system, which is the antithesis of a TradFi ETF. .
“If the adoption of cryptocurrencies occurs primarily through ETFs and similar centralized financial instruments, the main promises of the technology: decentralization and real ownership will not be fulfilled.”
Bromberg’s view runs contrary to the prevailing sentiment of enthusiasm around the potential of spot ETFs to attract institutional money. Some predict that ETFs could double bitcoin’s market capitalization and push it to $150,000 by the end of 2024.
CoinShares head of research James Butterfill told Cointelegraph that creating a wallet for secure self-custody remained a daunting task for many non-tech-savvy institutional and retail investors. He believes an ETF will improve market access and “help further democratize bitcoin.”
“Self-custody is simply not possible for many institutional funds as it falls outside the regulated framework in which they must operate,” Butterfill said, adding that this is also the case for some retail investors.
The head of research at Matrixport and author of Crypto TitansMarkus Thielen agreed, arguing that the reason so many cryptocurrencies remain on exchanges despite a series of crashes is because self-custody “remains problematic for most users and has clunky interfaces.”
Bromberg admitted that self-custody has historically been a challenge, but pointed to technology such as account abstraction – which allows for the creation of wallets without using a seed phrase and more recovery options if access is lost – as proof that it was possible. make “self-custody popularly usable.”
Who needs ETFs
Bromberg believes that the real solution so that institutional investors who want to hold cryptocurrencies can do so is for regulatory bodies to provide legal clarity and the sector to offer training on technology and products, so that institutions can comfortably self-custody.
“There are already institutions that have cryptocurrencies on their balance sheets, and others could follow suit,” Bromberg said.
Many public companies, such as automaker Tesla, business intelligence firm Microstrategy and a number of cryptocurrency miners, claim to hold cryptocurrencies, although the custody arrangements for most are unknown.
Butterfill said ETF-based bitcoin holdings would fall under a regulatory framework that would “ensure high custody standards.” Butterfill explained that some bitcoin ETF providers could offer physical redemption, similar to some gold-backed ETFs.
Wall Street Lawsuits Won’t Change Bitcoin
Other bitcoin advocates are concerned about the possible influence that massive asset managers like BlackRock could have over the Bitcoin network.
In October, bitcoiner Peter McCormack told Altcoin Daily that a BlackRock ETF “is good for the price, but bad for Bitcoin” and expressed concern that he could end up being the largest holder of Bitcoin through his ETF.
Butterfill said BlackRock would represent a “large and diverse set of clients” within a regulated structure that is “very different than an individual or the control that a government could exercise if there was such a large holder.”
Trading volumes for current bitcoin exchange-traded products typically represent a maximum of 5% of total daily bitcoin volumes, “so we have a long way to go before ETPs can challenge the broader market.” “he explained.
Thielen welcomed potential new bitcoin holders, stating that BlackRock’s ETF would “open the door to thousands of institutional players” who, he believes, will use bitcoin to replace “gold and other safe haven assets like Treasury bonds.”
He added that everyone has the right to hold bitcoin, and that the cryptocurrency has become a speculative asset, moving greatly away from its beginnings as peer-to-peer cash.
“We should welcome the ‘suits’ of Wall Street to become bitcoin promoters. “We can all benefit from it.”
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