According to one analyst, the establishment of a spot Bitcoin exchange-traded fund (ETF) in the US could lead to fundamental issues with Satoshi Nakamoto’s original goal for the anonymous cryptocurrency.According to Josef Tetek, a Bitcoin analyst at the hardware cryptocurrency wallet company Trezor, the idea of a spot Bitcoin ETF—an investment product that monitors the price of BTC by holding Bitcoin—confers with the concept of self-custody.
“In principle, spot Bitcoin ETFs take people further from self-custody and potentially introduce a systemic risk, as ETFs will be safer on the surface than exchanges,” Tetek said in an interview with Cointelegraph.
Referring to the situation of gold seizure in the US in the 1930s, the analyst speculated that one potential outcome of spot Bitcoin ETF certification would be that significant amounts of BTC would be kept in central locations where the government might grab them. Tetek went on
“And while a spot Bitcoin ETF would make exposure to Bitcoin price movements more accessible to individuals and institutions alike, simply buying Bitcoin through conventional means would offer the same exposure. Do we really need ETFs for this?”
The fact that ETF holders won’t be able to withdraw the underlying asset is another big problem with spot Bitcoin ETFs.Since the ETF itself holds these assets collectively, Tetek pointed out that there is a chance that “paper Bitcoin,” the supply of which is limited to 21 million coins, will be issued without authorization.The analyst said
“The result could be the creation of millions of unbacked Bitcoin, which would distort genuine markets and depress the value of real Bitcoin — all while handing greater agency to the giants of centralized, traditional finance. The very antithesis of Satoshi’s original vision.”
In light of the increasing market optimism—many corporations and analysts anticipate that U.S. securities authorities will approve a spot Bitcoin ETF in January 2024—Tetek’s comments regarding self-custody versus spot ETFs suggest a possible downside.
Spot BTC ETFs haven’t exactly been well received, though. According to BitMEX co-founder Arthur Hayes, spot Bitcoin ETFs have the potential to “completely destroy” Bitcoin if they become too popular.According to several Bloomberg analysts, these exchange-traded funds (ETFs) are anticipated to provide cheaper fees than those of centralized cryptocurrency exchanges like Coinbase, if not Bitcoin.The inventor of Quantum Economics, Mati Greenspan, claims that since retail investors will continue to use self-custody, there is no direct conflict between self-custody and spot Bitcoin ETFs.
“Personally speaking, I would never buy any sort of paper IOU forms of Bitcoin, but that’s because I have the option of self-custody,” Greenspan told Cointelegraph. “Most institutions don’t have that option,” he added.
“There are zero advantages and plenty of disadvantages for retail investors to hold Bitcoin ETFs. Way better to just hold Bitcoin,” Greenspan stated.