Financial experts worldwide agree that ETFs are powerful tools for investing in underlying assets
Argumentum ad verecundiam. Experts... Lol. Pfft. Trust the science, trust the government, trust black rock, trust the oligarchs, trust the leaders, trust the authorities.
This thinking actually runs entirely counter to the reason Bitcoin is important in the first place.
offering diversification, liquidity, and cost efficiency as effective vehicles for gaining exposure to underlying assets.
A tasty word salad.
Bitcoin doesn't need any of that. It's whole point was to separate you from the need for that.
Bitcoin is an asset that you don't strictly need someone to custody for you.
And I would argue that the phrase "underlying assets" is nothing more than magic words. And instead we should use what really are the words that describe the Bitcoin ETF.
Gigantic Throbbing Counter-Party Risk.
But it's risk with benefits, for sure. It's just that the benefits... the REAL benefits are for the companies that create the ETFs, not the customers.
One of the biggest selling points for ETFs is that they are regulated, that they meet the requirements for inclusion into other financial instruments that are regulated and created by a collusion between the companies that create them and the government.
Those two entities, the companies that create things like ETFs and the government, are also actually the exact same people.
It is kabuki. It is shadows cast upon a cave wall.
ETFs have become a cornerstone of modern portfolios. In 2024, about 16.9 million U.S. households owned ETFs, reflecting their mainstream adoption.[/b][/size]
Argumentum ad populum.
All the cool kids are doing it. All the sheeple are lining up for it. You're a fool if you don't!
I pride myself on nuanced thinking. Perhaps you could replace the word nuanced with the word erratic, but I prefer nuanced. And I think the ETFs have been a giant boon for Bitcoin in many ways, and they are a way for people who do not understand Bitcoin to actually take part in it, sort of. And some of their regulatory benefits are compelling. Being able to hold shares of a Bitcoin ETF in your retirement account, for example.
ETFs are an interesting and useful financial derivative invention. They are particularly handy when the underlying asset is something that's extremely difficult to custody oneself. Natural gas, for example.
But in my opinion, ETFs also have a built-in dark side. It centralizes ownership of important assets like gold and Bitcoin. And it creates an ad hoc fiat system on top of these "underlying assets" and sells you pieces of paper... digits in a computer.
People have a hard time digesting that you can change a couple very simple rules in a game and the game becomes something completely different with a completely different strategy.
I am a bad poker player, but I do enjoy the game. There are two versions of Holdem that are commonly played, Texas and Omaha. There are two extremely simple differences between these two forms of poker. In Omaha holdem, each player is dealt four cards. In Texas holdem each player is dealt two cards. In Omaha, you must use exactly two and only two of your cards to make a hand. In the Texas variety you can use one both or neither of your cards to make a hand.
These two tiny little differences, amongst all the other rules for the game that are identical, change the gameplay significantly. The strategies, the edges, everything is completely different because of those two tiny things.
People who think they are buying Bitcoin when they buy a Bitcoin ETF are playing a game that they do not understand the rules of at all. And the difference between Bitcoin held in one's own custody and shares of a Bitcoin ETF is enormous. The biggest difference is that you are neutering Bitcoin completely via the ETF and reintroducing not only simple trust but complex trust in a third party.
I'm not saying that Bitcoin ETFs are not useful or that there are not arguments for owning them.
What I am saying, hopefully somewhat clearly, is: THEY. ARE. NOT. BITCOIN.
And their presence is a magic trick that our broken financial system can use to lull people into allowing the banks and the corporations to have control over all things that can be considered property, while the consumer simply holds a promise from proven liars.
I have made many arguments for the institutional middleman with Bitcoin. I believe banks are necessary. I do not believe that every human being has the ability to custody their own Bitcoin without greater risk than using "experts" to do it. And the risks scale differently for each individual.
But, if one is capable of owning their own property and taking responsibility for their own assets and chooses not to, then they are actually opting out of the part of the game that is crucial to its eventual success. Without self-sovereign people, organizations, countries, etc., holding Bitcoin themselves the asset just turns into yet another paper printing machine.
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