Illustrated picture | source: CoinBank https://coinbank.cz/portal-o-kryptomenach
The end of this year means waiting to see when and if the US Securities and Exchange Commission (SEC) has approved enough to allow spot bitcoin ETFs (Exchange Traded Funds). While institutional investors are impatiently waiting for this opportunity, supporters of the traditional meaning of cryptocurrency are worried about such a move. The concern is that institutional trading could completely change the nature of Bitcoin and turn it from a tool of financial freedom into an institutional asset.
Can institutional food threaten bitcoin?
Artur Hayes, former editor-in-chief of the company BitMEX, warns against such a dream. Arthur Hayes in podcast On The Margin came out to expect approval of spot ETFs for bitcoins. It appears that if companies such as BlackRock and Fidelity decide to bulk buy free-standing bitcoin (BTC) into their reserves to cover the products offered, such a move could turn two decentralized cryptocurrencies into a cryptocurrency under the close control of a few institutions. Even if it is only Hayes’s speculation, it is misleading and points directly to a possible future problem that may arise in this connection.
The core of the concerns lies in how these institutional giants could potentially control BTC and thus change its basic way of use, which is decentralization and anonymity. From the very first moment, Bitcoin represents an alternative to the world of traditional finance (TradFi), when it built its reputation on decentralization and invulnerability. Bitcoin today is a financial system that works without any centralized authority and is thus the complete opposite of the world of TradFi, in which it is centralized and driven by profit maximization.
Entering institutional food, it could be a double-edged sword
Financial giants such as BlackRock, Fidelity and others could, in order to optimize their investment in BTC storage, build a world farm into an ETF, which would mean that they would be able to track all transactions with such an asset. In addition, investors will have to prepare for the fact that the permitted product of ETF spot offers for bitcoin by the SEC will be subject to detailed control activities. Anyone who invests in such a product will be far from anonymous. What’s more, state institutions will be able to control the seemingly decentralized market through these financial companies.
The kind of catch, according to Hayes, lies in the fact that mass BTC in spot ETF funds can turn a valuable asset into a stagnant asset. Both variants would thus be in stark contrast to what BTC represents to the average investor, i.e. a decentralized and anonymous cryptocurrency. Hayes on the podcast he addedand:
In fact, in the case of an ETF fund, you cannot use bitcoin, because it is a financial asset and not bitcoin itself.
Hayes’ argument rests on the view that the main strength of BTC lies in its decentralized nature, which enables the financial inclusiveness and freedom of this cryptocurrency. According to Hayes, if spot ETFs on bitcoin were to grow further, they could potentially “kill” BTC.
The institutional chapter is the driving force
On the other hand, growing institutional influence will undoubtedly have a positive effect on the cryptographic market. The editor-in-chief of DEX SynFuture, Rachel Lin, estimates that this institutional food could help BTC grow to $50,000 by the end of November alone. Lin to that ext:
Last week, BTC consolidated its January rise as ‘Uptober’, or saw a 29% increase in value. What is interesting is that when we look at historical data, November was not only better, with an average income of 35%. Therefore, if this year and November brought similar incomes, BTC could reach a value of around 47000 USD.
Bitcoin price chart (edited by author) | source: CoinBank https://coinbank.cz/mena/Bitcoin
If the bitcoin market was in a bad mood, confirm the options data as well. Close very tight in the expectation that BTC will reach its values in the near future. As of November 6, 2023, the options with the second open interest on the December values are $40,000 and $45,000 in the first two places. Even 5000 BTC is ready for sale in the option market if the value of bitcoin reaches 50000 dollars in December. That is, they are investing in the fact that bitcoin will be sent by the end of the year. The market thus erodes optimism regarding the growth potential of bitcoin, which is also supported by institutions.
Ing. Zbynk Kalousek
He studied economics and management at the Masaryk University in Brno. In the past, he was engaged in financial market analysis. He returns to this activity after a short pause. Co-founder of a company that deals with consulting and accredited extension services. He cooperates with several other companies. I see the cryptocurrency world as a progressive market, which offers full complexity, but also full of dangers, from decentralization, apolitical approach, to the high volatility of the exchange rate, which the crypto currency has been trading.
CoinBank
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