Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
According to Antonopoulos, ETFs, if thought of as instruments, allow investors to just speculate around the price of cryptocurrency but not actually hold them.
Andreas Antonopoulos, a long-time Bitcoin advocate and author of ‘Mastering Bitcoin’ has recently been quite outspoken about his view on Bitcoin ETF products. While investors have been very eagerly awaiting the arrival of Bitcoin ETF, which could bring institutional players with huge money in the game, Antonopoulos thinks it otherwise.
Antonopoulos describe exchange-traded-funds (ETFs) as financial instruments which can be traded in a similar manner to the stocks. He says that the Bitcoin ETF will hold the cryptocurrency while selling its shares in the Bitcoin by determining the price of the digital currency. The Bitcoin ETF shares will then be traded in the stock market, just like stocks, through any of the registered brokers.
Antonopoulos argues that in such case, the investors don’t hold the cryptocurrency that gives them the opportunity to speculate the price of the digital currency. This gives them the room to play with the prices without actually having the custody of the digital currency.
However, he accepts the fact that the arrival of Bitcoin ETF will inevitably create a short-term euphoria in the market, just like the way Bitcoin price went hitting its record-high of $20000 in December 2017 on the news of the arrival of Bitcoin Futures contract. Antonopoulos says that the arrival of ETF will open up the market for institutional players, and buying is undoubtedly going to increase in the initial stage, catapulting the price of Bitcoin.
However, in the long run, 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 said:
“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”.
Antonopoulos says that the arrival of Bitcoin ETF is inevitable looking to the huge market appetite for the investment product. However, he says that there is very little technical knowledge to support this appetite. He says that in the long run, two types of institutional investors would appear in the crypto space.
According to Antonopoulos, two categories on institutional investors would emerge: those who have the real technical knowledge about Bitcoin and benefit from all its associated advantages, and those who would depend entirely on intermediaries.