The year 2024 commenced with a significant development as the SEC granted approval for Spot Bitcoin ETFs in January. This decision sparked a revolution in the cryptocurrency space, attracting billions of dollars in investment and completely transforming the landscape of digital assets. The approval signaled a triumph for the countless crypto professionals, traders, and enthusiasts who had dedicated their time and energy to the blockchain over the past 15 years, as the big institutions that had previously dismissed and hindered its potential were now seeking to capitalize on it.
In the following months, the SEC also approved Ethereum ETFs, although this news didn’t generate the same level of excitement among the masses. Nevertheless, it further solidified the fact that crypto had become impossible to ignore and had become a significant consideration for traditional finance investors. These investors now had access to an exciting new asset class through their preferred brokers in the US.
Ironically, the mainstream adoption of crypto may also be its downfall. Let’s delve into the reasoning behind this.
Understanding the fundamental principles of decentralization is crucial. Decentralization offers numerous advantages, including speedy settlements, the absence of intermediary delays, upfront identification and reputation, a flat structure with no unnecessary overhead, permission-less user access, resilience against attacks, no censorship, no central point of failure, governance decisions made by consensus, and peer-to-peer communications. However, BTC and ETC ETFs threaten all of these values.
Investing through professional brokers undermines the speed of transactions, introduces delays through intermediaries, necessitates identification for KYC and AML checks, operates within a hierarchical structure with significant overheads and commissions, and requires permission for access. Additionally, brokerage accounts are vulnerable to hacking, censorship exists, each broker represents a central point of failure, governance is determined by senior management, and communications are far from peer-to-peer.
The founding principles of crypto, blockchain, and decentralization are fundamentally compromised by Bitcoin and Ethereum ETFs.
Most investors are primarily focused on achieving substantial profits. They seek out assets that can rapidly appreciate in value, allowing them to sell for a profit and move on to the next opportunity. This mindset is especially prevalent among new investors, particularly those transitioning from traditional finance, as they aim to capitalize on the volatility of BTC and ETH. Unfortunately, this approach has unintended consequences for those who have contributed to and developed the blockchain industry. The more individuals engage with centralized crypto ETFs, the closer we move toward a more centralized future for the crypto space.
“People become so fixated on get-rich-quick schemes, moon shots, and pump-and-dumps that they fail to recognize the bigger picture. Some investors are unintentionally harming the industry rather than helping it, but it’s not entirely their fault. Most are unaware. They don’t realize that making a few simple changes could support a new financial system for a better world.” – Takashi Nakamoto, Founder of BloomBeans.
Why is increased centralization a negative development? Much like how most individuals aren’t big fans of their bosses or governments, centralization concentrates power in specific entities and can overpower and marginalize individuals. Centralized systems grant all power to a central figure, transforming the structure into a pyramid and stifling innovation, hard work, and creativity. This leads to slow, bureaucratic, and inefficient processes. Ultimately, centralization will pave the way for decentralization, given the opportunity.
If we adopt a broader perspective on Bitcoin and Ethereum, packaging them neatly into ETFs, subjecting them to financial regulations, and trading them through brokers on stock exchanges merely transforms crypto into another mundane asset class for average investors. This approach hampers crypto’s potential to shape the future of money, to exist as decentralized digital currencies, and places their performance and ownership under the control of large asset managers like BlackRock, instead of being globally distributed.
ETFs transfer the trust of our beloved crypto to intermediaries, brokers, and institutions when it should be held in a sovereign and self-custodial manner by individuals seeking liberation from centralized ideologies.
One project that aims to educate investors about an alternative path forward is BloomBeans. It argues that if Bitcoin had developed its own financial system, it would resemble BloomBeans, which offers blockchain-backed Crypto Financial Assets such as pensions, insurance, income streams, and interest-free loans. Their financial model is based on mathematics and code, not centralized power, manipulation, and discrimination. BloomBeans is for everyone, and that is the core message of its Founder, known as Takashi Nakamoto.
In the future, if you find yourself tempted by investments in Spot Bitcoin ETFs or their Ethereum counterparts, reflect on this article, the dangers we’ve highlighted, and the available alternatives. Consider whether such investments truly align with the progressive vision the world’s largest trillionaire wealth managers would want you to believe.
Tags: BTC, ETH
