- Bitcoin ETFs contradict the purpose of cryptocurrencies by linking them back to centralized financial systems and government currencies that cryptocurrencies aimed to avoid
- Bitcoin ETFs risk buying bitcoin at the peak of its popularity and price, just like past thematic ETFs bought into assets at speculative peaks leading to poor returns
- Bitcoin ETFs undermine decentralization and may buy high, making them a bad deal for investors on two fronts
The new bitcoin ETFs risk being bad for investors in two key ways. As holders of Bitcoin, they undermine the purpose and long-term value of cryptocurrencies. And as ETFs launched during a moment of popularity, they might repeat the mistake of past thematic funds by buying at a peak.
Bitcoin ETFs Undermine the Purpose of Cryptocurrencies
The new bitcoin ETFs reconnect Bitcoin to Wall Street‘s old financial infrastructure and to the dollar. Cryptocurrencies like bitcoin were created specifically to avoid centralized financial systems and government-backed currencies. By linking Bitcoin back to these traditional systems through ETFs, the core purpose of cryptocurrency is diminished.
Bitcoin ETFs Might Buy at the Peak
Many past ETFs based on popular themes have launched right as that theme reached a speculative peak. For example, cannabis ETFs in 2019 bought right at the height of the cannabis stock bubble. Similarly, bitcoin ETFs are launching after a huge bitcoin price run-up fueled mostly by speculation. This suggests they may be buying right at bitcoin’s peak, which would lead to poor returns for investors.
In summary, bitcoin ETFs undermine the decentralized nature of cryptocurrencies while also potentially buying at the height of a speculative mania. This makes them a doubly bad deal for investors.