Bitcoin ETF: feast or famine?

January 2024.

Headlines singing to the rooftops all over the world.

Bitcoin ETF!



Bitcoin ETF!



Bitcoin ETF!

No news is bad news for Bitcoin.

But in the years I’ve been following this market closely, I’ve seen plenty of hype, so frankly I don’t see this step in the journey as all that different.

So what’s really going on here?

As always there are two sides to the coin.

Some pros.

Some cons.

Let’s work through a few of them.

First and foremost, it’s important to recognise the importance of a Bitcoin ETF from a legitimisation perspective.

It’s a coming of age.

Bitcoin has made the milestone that is their school leavers ball…

“Smells Like Teen Spirit” has everyone jumping on the dance floor.

A first snog is under way…

For the traditional investment world, the fiat system, there is now an easier on-ramp to Bitcoin, approved by the US regulator, so fund managers can allocate to their hearts content.

Indeed some analysts claim that already 3% of Bitcoin supply is in the hand's of ETFs already.

The demand has been strong no doubt.

But think of a leavers ball, it’s not the first time kids have got drunk, indeed many of them have been partying for years.

This is similar.

Retail investors have been able to front run this demand.

Which on the one hand is simply glorious.

Excellent price action potential to the upside, which the ‘Lords of Finance’ have been unable to capture, due to their own regulations locking them out of the market…

But on the other hand I think this ‘misses the forrest for the tree’s’.

Bitcoin is a freedom technology.

It is a viable alternative to Government controlled fiat money.

Taking self-custody of a digital bearer asset is a superpower!

We’re separating money from state.

This is history in the making…

Is it really a good thing that centralised entities, ripe for Government coercion, now have the ability to accumulate large parts of the Bitcoin network supply?

The cynic in me screams be careful.

Indeed, if I wanted to try and influence, stop, or take control of Bitcoin, a logical attack vector is a ‘Trojan Horse’ style, utilising branded ETF’s, leveraging money I could print.

Hoover up a big percentage of the supply, then in theory, could one could try and dictate an alteration of the consensus?

Maybe.

What are the chances of this?

My view: low.

Wind the clock back to ‘the blocksize war’ of 2017, when the network mining capacity was far more centralised, then I think the risk was far higher.

The precedent was clearly set thankfully.

Zealot users and node-runners don’t want this thing to change.

This is the beauty of a truly decentralised system.

Accumulate as much as you can, but you cannot change how it functions.

We’re truly ruled by rules, not by rulers.

Back to these ETF’s.

My more trusting side points out the transparency and reporting requirements that the SEC has put in place.

Re-hypothecation is not allowed.

Whilst some of the ETF’s are run by people prominent in the Bitcoin space that I’ve studied before.

Hmmmm.

As always a few ways to look at things.

Let’s start to wrap this up.

Ultimately, I welcome the approval of US Bitcoin ETF’s, as an important step in the legitimisation of Bitcoin.

But temper that.

Who controls these inflows of capital?

Are they a threat?

How might they try to co-opt the network?

Like those teenagers I envisioned before, think of MicroStrategy, Tesla, and other stock listed companies that have held Bitcoin for years already; they’ve been boozing well before their final night of school…

Yes Blackrock has now joined the party.

But does letting the teachers pet in really improve the vibe?

Time will tell.

Personally, I prefer to keep a more macro lens.

What’s the latest hash rate?

How is user growth playing out?

Where is the fiat system breaking?

There’s always going to be something in the hype cycle of significance when it comes to Bitcoin.

What’s next?

Governments stacking…?

Let’s see!

Best Jake

Ps - no news is bad news for Bitcoin. It’s already one of the most recognisable brands globally, so the fanfare of ETF’s stokes the fire a little more, which as a long-term HODLer I welcome. Capital growth potential: increased. Interest in this critical niche: increased. Capacity of mainstream media output captured by Bitcoin: increased… Saying all that… be careful who you jump into bed with!