Why are millions buying ETFs tied to Bitcoin and not owning Bitcoin themselves?

[Exitoral]

So this topic was inspired by this person.

The original definition of "decentralized" in the context of Bitcoin was a network that could not be easily controlled by the US government because there was no central legal entity or small group of entities to prosecute.

By that definition, Bitcoin is no longer decentralized.

First off, what is bitcoin ETFs? A Bitcoin ETF is a financial product that tracks Bitcoin's price and trades on traditional stock exchanges. Instead of buying and holding actual Bitcoin you buy shares of the ETF through a normal broker just like buying company stocks.

Bitcoin as we know it is decentralised. Good. Also, it is also accessible to everyone. We all know that. Now institutions created Bitcoin ETFs because they couldn't directly own bitcoin. The problem now is that a lot of people are actually buying these ETFs rather than buying bitcoin directly. Of which these institutions are under the US. The US has indirectly taken control of the road used to access bitcoin. Controlling how to get bitcoin still holds great power as the protocol itself.

The main question is why would people take that route knowing fully well or maybe they don't that bitcoin aims for decentralisation and buying Bitcoin ETFs defeats that notion.

[Charles-Tim]

Some people do not want to know what cryptocurrencies are. In fact, some people are telling them that it is gambling, or telling them that they are very risky, or scam. Some people just do not know about cryptocurrencies, but they have much knowledge about stock markets. So the ETFs bring more exposure.

[joniboini]

The US has indirectly taken control of the road used to access bitcoin.

I haven't keep up with the news, but do the US forbids people from buying Bitcoin through exchanges or other means? As far as I know, people can choose to get their Bitcoin through other means still. Sure, some of them will force KYC to you, but if you're fine with some hassle like searching for a good P2P offer, it's not impossible to buy your coins and save it on Electrum or other wallets.

We just to accept the fact that the majority of people aren't here for the value that Bitcoin brings, at least not all of it. Most of them only view it as investment vehicle, not an alternative tool to prevent double spending that doesn't rely on a centralized entity.

[BIT-BENDER]

Some people do not want to know what cryptocurrencies are. In fact, some people are telling them that it is gambling, or telling them that they are very risky, or scam. Some people just do not know about cryptocurrencies, but they have much knowledge about stock markets. So the ETFs bring more exposure.

It's just crazy the things you hear when you actually try hearing what people thinks about Bitcoin or Crypto-currency, I have experienced it myself severally and amongst the craziest one is those who think that Crypto-currency is a Ponzi scheme where you just put in money do tasks and expected an unexplained returns

[Yamane_Keto]

Will this change the fact that Bitcoin is decentralized? Absolutely not.

The main question is why would people take that route knowing fully well or maybe they don't that bitcoin aims for decentralisation and buying Bitcoin ETFs defeats that notion.

Because they aren't interested in Bitcoin itself, but rather in the profits generated from Bitcoin's price fluctuations. These institutions buy Bitcoin and hold it on their behalf.

[Alpha Marine]

First of all, you need to understand that people who buy Bitcoin EFTs are not regular people like you and me; they are mostly institutional investors and people who want to grow their wealth. These are people who can give their assets to asset managers to manage. The asset managers make the decisions of how to grow the wealth and reduce risk. This doesn't mean normal folks don't buy ETFs instead of Bitcoin itself, though.

Also, these people don't care about self-custody; they just want to grow their wealth (I can't fault them for that). They don't have to deal with private keys or wallets. It's convenient for them. Some of them do it for regulatory reasons and easier tax filings.

[Bushdark]

Some people do not want to know what cryptocurrencies are. In fact, some people are telling them that it is gambling, or telling them that they are very risky, or scam. Some people just do not know about cryptocurrencies, but they have much knowledge about stock markets. So the ETFs bring more exposure.

This might be as a result of not taking any risk at all leaving the company that is providing the service to be the one taking the risk.
This could be what has been responsible for so many short rang prices in the market. If these companies are aware that their investors are expecting certain profits from them at the end of each month or every 6 months, they'll gonna do anything that is going to make them profitable so that investors can have a share of it. ETF conpanies may be responsible for the huge adoption in the crypto market lately and this will only bring too many competitive move in the market because most of these companies wants to be profitable by all means.

[BitGoba]

Most wealth is held by older people, and they are used to doing everything through their broker. I know many older people who do not even use a mobile phone properly. They never got used to that, let alone learning how Bitcoin works, how to hold their own keys, and so on.

For them, it is simply easier to let someone else do it for them.

But once you go down the rabbit hole and understand how the fiat system works and how it is basically one big Ponzi-like scheme that will eventually collapse under hyperinflation  you start to see things differently.

When banks stop working and the dollar no longer has any real value, only Bitcoin or gold will allow you to buy food, fuel, and other real goods.

At that point, your ETF will mean nothing.Many people will learn that lesson the hard way.

[ColdLava40]

The main question is why would people take that route knowing fully well or maybe they don't that bitcoin aims for decentralisation and buying Bitcoin ETFs defeats that notion.

Not everyone is drawn to Bitcoin because of decentralization.

It's all around the profit making. Investors wants to make profits both on long and short term, they don't want to worry about keeping their seed phrase or keys safe.

To them it feels like a hurdle, stressful cause you have to be security cautious, keep your privacy and many others. But real Bitcoiners have no issues protecting what matters the most. Profit might be everyone's goal, but decentralization should be the reason for our adoption.

[Doan9269]

Not everybody is making the right move towards bitcoin adoption and use for their own profits realization when it comes to asset investment, it is also important that we should be able to understand the glaring difference between investing in Bitcoin ETF and Bitcoin, I don't know the perception at which some people are investing towards centralized stocks and assets in this manner, we have the great opportunity of investing in Bitcoin under a decentralized network without having to go through the normal protocols from this financial institutions.

[Lucius]

The main question is why would people take that route knowing fully well or maybe they don't that bitcoin aims for decentralisation and buying Bitcoin ETFs defeats that notion.

Because they aren't interested in Bitcoin itself, but rather in the profits generated from Bitcoin's price fluctuations. These institutions buy Bitcoin and hold it on their behalf.

What do you think is the percentage of those who choose non-custodial wallets for their private keys and are interested in Bitcoin as a cryptocurrency? I would dare to say that this percentage is very small (less than 20%), and the difference between those who invest in Bitcoin through ETFs and those who buy through CEXs and withdraw to their wallets is only that the former have money and are not intelligent enough to download and install a wallet and do everything that needs to be done - while the latter somewhat understand what "not your keys, not your coins" means.

By the way, spot ETFs are supposed to buy BTC based on which they sell shares in the fund, but who says that's always the case? So-called stablecoins are supposed to be backed 1:1 by some fiat currency, and we know that's not always the case.

[SquirrelJulietGarden]

First off, what is bitcoin ETFs? A Bitcoin ETF is a financial product that tracks Bitcoin's price and trades on traditional stock exchanges. Instead of buying and holding actual Bitcoin you buy shares of the ETF through a normal broker just like buying company stocks.

Bitcoin as we know it is decentralised. Good. Also, it is also accessible to everyone. We all know that. Now institutions created Bitcoin ETFs because they couldn't directly own bitcoin.

Bitcoin Spot ETFs actually own bitcoin, it's only their customers who buy Bitcoin Spot ETF shares don't own bitcoin, they own the shares of Bitcoin Spot ETFs. It's risky and more dangerous than people who buy bitcoin on centralized exchanges and let their bitcoins in accounts there. Generally both actions result in no actual ownership of bitcoins for the investors or buyers. They have to rely on either Bitcoin Spot ETF or centralized exchange to proceed withdrawals for them, and sometimes there is no approval.

But saying Bitcoin network is no longer decentralized is not true as Bitcoin Spot ETFs don't do Bitcoin mining and own no Bitcoin hashrate.

[Ucy]

Well, not everyone will like to self-custody. I think they do that because they feel their assets are more secure with governments in charge.
By the way, centralized/custodial exchanges have been doing similar thing the "financial product" do today, and they are controlled by governments. . So, it's nothing unique. Governments around the world are like parents to such people. There may be times when they become prepared enough to take custody of their stuff.

It's important to note that many people in US and around the World do the opposite. They prefer self-custody, decentralization, privacy, etc. Such are more than enough to cancel out any control the custodials may try to exert on Bitcoin. Even 1 person with $10 worth of Bitcoin who is strongly rooted in the Bitcoin/right principles have more influence over Bitcoin than those with millions in custody of a  financial product but not rooted in the principles. The financial product won't be as influencial as well, due to the fact its operation contradicts the principles.

[Smartprofit]

The US has indirectly taken control of the road used to access bitcoin.

I haven't keep up with the news, but do the US forbids people from buying Bitcoin through exchanges or other means? As far as I know, people can choose to get their Bitcoin through other means still. Sure, some of them will force KYC to you, but if you're fine with some hassle like searching for a good P2P offer, it's not impossible to buy your coins and save it on Electrum or other wallets.

We just to accept the fact that the majority of people aren't here for the value that Bitcoin brings, at least not all of it. Most of them only view it as investment vehicle, not an alternative tool to prevent double spending that doesn't rely on a centralized entity.

Of course, we can live with this, but won't we eventually reach a situation where the minority who don't undergo KYC on centralized cryptocurrency exchanges and keep their Bitcoin in non-custodial wallets are declared potential criminals? 🙋

If this happens, all their Bitcoin will be declared illegal. Analytics programs will label them accordingly and equate them with Bitcoins associated with drug sales.

Governments try to avoid attacking large social groups. That's why they don't try to ban Bitcoin directly. However, 5 percent of Bitcoin owners, for example, could easily be declared criminals and subjected to repression. This wouldn't cause any social unrest. On the contrary, people would rejoice that the scoundrels who didn't want to undergo KYC have been punished... 🤷

[Way of a writer]

OP it's like saying you don't understand this world and the human race.

How come I noticed that humans like been controlled and not you? The banking system have entered peoples bloodstream to the extent that they will rather be monitored and control by their leaders than getting things done themselves.

They all eye on the money that Bitcoin is bringing those who took it up on themselves to buy and hold Bitcoin but they don't want to buy and hold like them, yet they want to make that money too so ETF feels like a perfect fit to their longing.

People like been controlled, doing something that the government or their leaders don't approve even if it's not breaking the rules of that country is like a sin to them.

[Cryptmuster]

Bitcoin Spot ETFs actually own bitcoin, it's only their customers who buy Bitcoin Spot ETF shares don't own bitcoin, they own the shares of Bitcoin Spot ETFs. It's risky and more dangerous than people who buy bitcoin on centralized exchanges and let their bitcoins in accounts there. Generally both actions result in no actual ownership of bitcoins for the investors or buyers. They have to rely on either Bitcoin Spot ETF or centralized exchange to proceed withdrawals for them, and sometimes there is no approval.

But saying Bitcoin network is no longer decentralized is not true as Bitcoin Spot ETFs don't do Bitcoin mining and own no Bitcoin hashrate.

I think the main reason is that people are shifting the risks onto the companies that manage the Bitcoin ETFs. In that case, the investor is not responsible for storing the Bitcoin, and if any losses occur because of custody issues, the company not the investor, will be responsible for them.
Some investors may not fully understand how Bitcoin actually works, while others who do understand it may simply prefer to delegate the responsibility of storage to someone else.

[legiteum]

So this topic was inspired by this person.

I'm nothing if not inspirational... .

The main question is why would people take that route knowing fully well or maybe they don't that bitcoin aims for decentralisation and buying Bitcoin ETFs defeats that notion.

Because decentralization is no longer necessary, and people know it.

Bitcoin was originally decentralized for one reason: to be able to offer a product on the Internet that would have been shut down by authorities if there was an easy and central entity to prosecute. Any p2p architecture, like Bitcoin's, creates a sort a "whack-a-mole" problem that usually causes governments to give prosecuting, at least initially. Before Bitcoin, there were other p2p currencies, but Bitcoin introduced the crucial element of the proof-of-work scheme, which made it resistant to 51% attacks, which allowed it to exist long enough to get big.

Now that digital currencies are legal, there's no reason anything needs to be decentralized in the sense of being resistant to government shutdown. Today, nobody wants to shutdown Bitcoin, and the president of the USA personally has nearly one billion dollars in Bitcoin, so it's probably one of the most legal products in human history.

Hence Bitcoin could be run by one company, like many of the other cryptos, and it would not only be perfectly fine, but it might even be much more successful.

Not only do people use ETFs for Bitcoin, they use centralized brokers and apps like CoinBase and Robinhood. Almost every user of Bitcoin does it this way. Why? Again, all they care about is Number Go Up, not some sort of technical architecture--especially one like blockchain that isn't even necessary anymore.

[Renampun]

The main question is why would people take that route knowing fully well or maybe they don't that bitcoin aims for decentralisation and buying Bitcoin ETFs defeats that notion.

That's because they don't want the hassle of managing Bitcoin, so they entrust it to ETF providers so they can continue investing in Bitcoin without having to bother managing and securing the assets in their wallets. usually, these people don't really care about decentralization, and anything related to the freedom offered by Bitcoin.. what they care about is only profit alone and not dealing with the concept of decentralization or blockchain technology itself. especially since the ETF providers are long-established and regulated companies, so people feel safer and more comfortable placing their investments there  even though they don't fully own their Bitcoin.