Bitcoin ETFs are not crypto’s finish line

The US Securities and Exchange Commission’s approval of the bitcoin ETFs was rightfully cheered on by most of the crypto world. But as the dust settles, we need to ask ourselves: What do these instruments really mean for us?

ETF approval signals a step forward for Bitcoin and, more broadly, crypto’s legitimacy. It’s a huge boost on the path from a niche to a major sector. 

But it also makes us more reliant on traditional financial institutions — exactly the ones that the technology was meant to free us from.

Now, it’s crucial for our industry to pivot. We need to take this enthusiasm and turn it into something more: encouraging genuine, self-custodial asset ownership, giving people access to the true benefits of crypto. This technology is about much more than just its price.

Just like how the existence of gold ETFs doesn’t invalidate the importance of gold itself — in jewelry, electronics and more — the advent of these bitcoin ETFs don’t in any way diminish the necessity of building real products with crypto. 

Is crypto losing its soul?

When I co-founded the Stanford Bitcoin Group in 2013, I was captivated by one of Bitcoin’s core promises: the empowerment of owning and controlling your own money. Bitcoin is, like physical cash, a bearer instrument. Your control over it isn’t subject to anyone else’s approval. 

But these ETFs, even with all their benefits, boil down to simple financial tools, the same as all the rest created by the traditional finance industry. You hand over control of your money to someone else in order to get exposure to an asset class. 

While this is still good for the crypto industry, it steers people away from the primary goal of disintermediating centralized financial control and empowering individuals.

Read more from our opinion section: Bitcoin ETFs could actually be good for the environment

ETFs strip away all the incredible utility of bitcoin, leaving only the price. But what makes bitcoin truly fascinating is its vision: its peer-to-peer, decentralized nature, not just its price. 

Satoshi Nakamoto didn’t dream up bitcoin just to create another stock to trade. They saw a whole new way of dealing with money — a system without the middlemen, where people could transact directly with one another. A peer-to-peer electronic cash system.

As bitcoin gains more popularity, it’s crucial to remember these fundamental principles. The essence of crypto isn’t just in its financial value, but in its potential to revolutionize how we perceive and engage with money.

The dangers of centralization

The rise of bitcoin ETFs is already leading to some consolidation of BTC ownership by a few institutional players and their custody providers.

Just a couple weeks after its launch, BlackRock’s bitcoin ETF is now managing around 49,000 bitcoins. If those were all in the same address, that would make the address the fifteenth largest holder of bitcoin already. If this trend persists, it could result in the concentration of significant bitcoin holdings in the hands of a few financial giants.

Read more from our opinion section: Let’s be real: Bitcoin ETFs have never really mattered

In the first block of the Bitcoin blockchain, Satoshi encoded a message: “Chancellor on brink of second bailout for banks.” It’s impossible to know for sure what exactly they meant, but many believe it to be a reference that Bitcoin was intended — as a technology — to mitigate the pitfalls of centralized financial institutions and the societal risks that come with them. 

But here, a decade and a half later, we’re seeing a movement towards those very same institutions controlling huge chunks of bitcoin’s supply.

Upholding crypto’s values

So, how do we maintain the true spirit of this technology?

First, we should focus on building products that are as straightforward to use as buying a bitcoin ETF through a brokerage account. If we are to fulfill the vision of a peer-to-peer electronic cash system, we need to lower the barrier to entry as much as possible. There is a pressing need for accessible, self-custodial products that provide users true ownership over their money.

Second, we need to educate newcomers about the true value of this technology. 

With the influx drawn in by the ETFs, many will be fixated on the price, and won’t work to understand the underlying potential. We, as an industry, must articulate the broader significance of crypto, ensuring that new users see what it can do — beyond just market speculation.

The bitcoin ETFs are a powerful force, and we should capitalize on them. They will bring new market participants and increased attention.

At this crossroads, it’s up to us in the crypto industry to steer the ship. We need to make sure that as bitcoin and other digital assets step into the limelight, we don’t lose sight of what made them revolutionary in the first place. Now’s the time to get back to work and ramp up our efforts in building and promoting products that are true to the technology’s core vision. 

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