The Limitations of Bitcoin ETFs: A Stepping Stone or a Detour for Crypto Ownership and Sovereignty

finance and empower individuals with true financial ownership and sovereignty.

In recent weeks, newly approved U.S. Bitcoin ETFs have experienced incredibly successful launches, as evidenced by their impressive trading volume and flow metrics. However, it is important to note that these ETFs do not align with the true purpose of Bitcoin, which is to facilitate peer-to-peer transactions and bypass traditional intermediaries. Investors in Bitcoin ETFs are simply gaining exposure to the price of Bitcoin, without actually owning the asset itself. As a result, they do not benefit from the core principles that Bitcoin was designed to uphold – financial ownership and sovereignty for all.

The anonymous inventor of Bitcoin, Satoshi Nakamoto, envisioned a financial system that would allow anyone to experience true ownership and sovereignty. However, Bitcoin ETFs replicate the functioning of our outdated financial system, which is built on old technologies and relies on intermediaries. By reintroducing counterparty risks, Bitcoin ETFs undermine the very essence of Bitcoin and its potential to revolutionize finance. We have witnessed numerous examples of traditional players mismanaging their clients’ assets, resulting in the loss of billions of dollars. Bitcoin was meant to provide a way out of this flawed and archaic system, which currently only benefits a small percentage of Americans.

In addition to counterparty risks, Bitcoin ETF investors are also confined within the U.S.-centered financial system, while the core attribute of crypto is to enable anyone to access a permissionless network and benefit from decentralization. ETFs have limitations and boundaries, while crypto is inherently permissionless. These two concepts stand in stark opposition to each other.

Furthermore, Bitcoin ETF investors do not possess what truly matters in the world of crypto – a private key or a secret algorithmically-generated code that mathematically proves ownership of digital tokens. Holding these keys is the only way for individuals to interact with the crypto world, own Bitcoin, engage in decentralized finance, and leverage decentralized applications with true ownership and freedom. Private keys are the entry points to the future of finance and the future of the Internet, something that ETFs can never provide.

In addition to contradicting the utility of crypto, Bitcoin ETFs are also more expensive than the sovereign choice of secure self-custody. Investors in Bitcoin ETFs pay fees ranging from to without actually owning the underlying asset. Security is crucial for both individuals and corporate players entering the crypto space, and financial intermediaries responsible for safeguarding clients’ assets must employ robust security and governance frameworks to avoid disasters like the FTX incident.

However, this does not mean that Bitcoin ETFs are entirely detrimental to the crypto industry. Ledger, a prominent player in the crypto space, acknowledges that ETFs can serve Bitcoin in multiple ways. Firstly, they bring a fresh wave of new entrants who gain exposure to crypto through ETFs, thereby popularizing Bitcoin. The advertisements for Bitcoin ETFs across the U.S. serve as powerful marketing tools for Bitcoin, and their acceptance into the highest spheres of the financial system makes it harder for skeptics to dismiss Bitcoin as a tool for illicit activities.

Secondly, Bitcoin ETFs have the potential to serve as gateways to the promised land of self-custody in the crypto world, just as centralized exchanges have done in the past. A virtuous cycle may unfold, where millions of people gain ETF exposure to Bitcoin, learn about the benefits of digital ownership, and ultimately opt for true self-sovereignty. The approval of the first gold ETFs did not hinder private ownership of gold; instead, it popularized it. Similarly, Bitcoin ETFs can be seen as a form of window-dressing, but they can also be utilized as stepping stones towards the true promise of ownership and sovereignty in the crypto world.

Contrary to the beliefs of skeptics, the future of Bitcoin does not lie in becoming a speculative asset stored in ETF-like investment vehicles for mainstream investors. Instead, it represents a paradigm shift that has the potential to rewrite the rules of finance and empower individuals with true financial ownership and sovereignty. Bitcoin ETFs should be seen as a temporary tool that can be leveraged to achieve this ultimate goal.