Widely recognized security expert and cryptocurrency researcher Andreas Antonopoulos recently said in a Q&A session that he is against Bitcoin exchange-traded funds (ETFs) and their potential impact on the crypto market.
With ETFs, large-scale institutional investors and retail traders in the regulated traditional finance sector can purchase and sell assets that represent the value of Bitcoin. Antonopoulos explained that ETFs leave the market vulnerable to manipulation as they give more leverage to traders in regulated financial markets. Antonopoulos said.
“Everybody is so excited about ETFs. What we have seen in other markets is that when an ETF becomes available, the price really increases dramatically, as suddenly that commodity becomes available to a lot more investors and these investors pile on. But, the other side of it is that there are always these claims that the commodities markets are heavily manipulated and opening up these ETFs only increase the ability of institutional investors to manipulate the prices of commodities.”
Can This Happen to Bitcoin?
While it has not been conclusively proven, many investors and analysts in the cryptocurrency sector have claimed that the introduction of the Cboe and CME Bitcoin futures market in December 2017 contributed to the price drop of cryptocurrencies, as the futures market provided accredited investors leverage and incentive to manipulate the price of Bitcoin.
For instance, earlier this week, BKCM CEO and cryptocurrency investor Brian Kelly stated that the increase in the price of Bitcoin may have been caused by the expiration of futures contracts. On CNBC’s Fast Money, Kelly said:
“Today we had Cboe futures expiration. Prior to expiration, on average, you’ve seen Bitcoin down. Then expiration comes, and then next six days, you see an increase of about six percent. That’s happened basically on average, in each of the expiration.”
— CNBC’s Fast Money (@CNBCFastMoney) August 15, 2018
If the futures market, which investors expected to have more activity prior to its 2017 December launch, has much leverage on the Bitcoin market. A Bitcoin ETF that launches in US markets will have significantly more influence on the price of Bitcoin.
With ETFs however, since they operate strictly regulated, insured, and protected Bitcoin investment vehicles, institutional investors and retail traders are not incentivized to bring down the price of Bitcoin. But, if the investors have a solid reason, large-scale investors can easily influence the price trend of the Bitcoin market. Antonopoulos added,
“I’m going to burst your bubble. I know a lot of people really want to see an ETF happen because ‘to the moon,’ ‘lambos,’ and all of that, I think its a terrible idea. I still think its going to happen, I just think its a terrible idea. I’m actually against ETFs. I think a Bitcoin ETF is going to be damaging to the ecosystem.”
More importantly, Antonopoulos emphasized that an ETF essentially eliminates the initial necessity of a decentralized financial network because it takes away the freedom, privacy, and authority an investor of Bitcoin might otherwise have over their own funds. Antonopoulos explained:
“A Bitcoin ETF is basically going to be a very large custodial of Bitcoin. That large custodial holder of Bitcoin will hold Bitcoin on behalf of the shareholders and give them a traded share in that Bitcoin. But, they don’t give the owners of the ETF any of the responsibilities and rights a key holder of a Bitcoin has.”
Why Are Investors so Excited About ETFs?
As the media continues to generate hype around Bitcoin ETFs and their potential impact on the price of Bitcoin, the majority of investors highly anticipating an ETF debut are considering situations where an ETF leads to institutional investors allocating billions of dollars into the Bitcoin market.
Ultimately, it is important to recognize the possibility of other outcomes that can negatively influence the market in order to assess the real impact of an ETF on the crypto market as a whole.
Cover Photo by Brandon Wong on Unsplash
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