CoinList Founder Andy Bromberg Believes Spot Bitcoin (BTC) Exchange Traded Funds (ETFs) Are Simply “Diluted Cryptocurrencies” and a Sign the Industry is Heading in the Wrong Direction, Amid Growing Uproar on possible ETF approvals in the United States.
Bromberg, also CEO of payments-focused 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 positive for cryptocurrency adoption, but asserted that the success of the space comes from helping people self-custody their assets and detach themselves from the traditional financial system – the antithesis of a TradFi ETF.
“If cryptocurrency adoption occurs primarily through ETFs and similar centralized financial instruments, then the core promises of the technology will not be realized: decentralization and true ownership.”
The rise of rollups and account abstraction unlocks the ability to build payment applications on Ethereum as good as (or better than) web2 products.
Between the regulatory viability of self-custody and that new technology, it’s the right place to focus.
And that’s what cryptocurrencies are all about.
—Andy Bromberg (@andy_bromberg) September 20, 2023
Bromberg’s view runs counter to the prevailing sentiment of enthusiasm around the potential of spot ETFs to make institutional money. Some predict that ETFs could see Bitcoin’s market capitalization double and the price reach $150,000 by the end of 2024.
CoinShares head of research James Butterfill told Cointelegraph that setting up a wallet for secure self-custody was still 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.
Head of research at Matrixport and Crypto titans Author Markus 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 technologies 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 self-custody was possible. ”.
Institutional investors need legal clarity, not ETFs
Bromberg believes the real solution to providing institutional investors who want to own cryptocurrencies a way to do so lies in regulatory agencies providing legal clarity and the industry providing education on technology and products so that institutions can comfortably self-custody.
“There are institutions that already have cryptocurrencies on their balance sheet, and others could follow,” Bromberg said.
Many public companies report cryptocurrency holdings, including automaker Tesla, business intelligence firm MicroStrategy, and a host of cryptocurrency miners, although it is unknown what the custody arrangements are for most.
Whenever the bitcoin spot ETF is approved, we will see what true global demand for the investment asset looks like.
Large institutions are not buying bitcoin for transactions, they will want exposure to the best store of value currently available.
– Pompa (@APompliano) November 13, 2023
Butterfill said ETF-based Bitcoin holdings would fall under a regulatory umbrella that would “ensure high custody standards.” He explained that some Bitcoin ETF providers might 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 would be “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.
1. BlackRock files for an ETF.
2. Retail purchases #Bitcoin sending it higher in anticipation of being able to sell even more to “late-arriving” institutions.
3. BlackRock Ditches Retail (You) After the Bomb.
4. BlackRock FUD put your bags back down so they can… https://t.co/SxBBKeAoI7
-SHELDON EVANS (@SheldonEvans) November 14, 2023
Butterfill said, however, that BlackRock would represent a “large and diverse set of clients” within a regulated structure, which is “very different from the control that an individual could exert over a government if there were such a large holder.”
Related: Former Cantor Execs Launch Crypto Lending Platform Awaiting Bitcoin ETFs
Trading volumes for existing Bitcoin exchange-traded products typically account for a maximum of 5% of total daily Bitcoin volume, “so we have a long way to go before ETPs can challenge the broader market,” he explained. .
Thielen welcomed potential new Bitcoin holders and said 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 bonds.” Treasure”.
He added that everyone has the right to own Bitcoin and that the cryptocurrency has become a speculative asset, mostly moving away from its peer-to-peer cash beginnings.
“We should welcome the ‘suits’ of Wall Street to become Bitcoin promoters. “We can all benefit from it.”
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