The price of bitcoin rose to its highest level in more than two years this week, as speculators bet that the first approved stock market funds for cryptocurrencies would open the door to a wave of new investors.
But some enthusiasts say the Wall Street takeover betrays their vision of cryptocurrencies as an alternative financial system away from the prying eyes of government and mainstream finance, and reinforces Bitcoin's status as merely a means of speculation.
“The founding principles of bitcoin and decentralized currency are really this cypherpunk, going against the grain, going against big institutions,” said Xavier Nukajam, founder of a cryptocurrency startup from the UK. “If you create this alternative and have to submit to what already exists… you have failed.”
That filing was underscored this week by the hype surrounding the launch of Bitcoin exchange-traded funds, more than 10 years after applications were rejected by the Securities and Exchange Commission.
These funds allow investors to own Bitcoin via a regulated instrument listed on a stock market, without directly holding the cryptocurrency itself. They are run by established Wall Street giants, including BlackRock, Invesco, and Fidelity — a far cry from largely unregulated exchanges like collapsed FTX and Binance, which were fined $4.3 billion by US authorities last month for money laundering and sanctions violations. International.
The ETFs, which trade on the NYSE, Nasdaq and CBOE Global Markets, generated a total trading volume of $4.37 billion on their first day alone, according to CCData.
Asset manager Franklin Templeton attempted to underscore its newfound crypto credentials by turning founding father Benjamin Franklin's eyes in its logo into red lasers on social media — imitating a popular meme denoting enthusiasm for bitcoin.
“It is the end of a very long journey,” said Jean-Marie Mugnitti, CEO of CoinShares Asset Management. “Bitcoin has graduated with distinction and is recognized as an investable asset class.”
Bitcoin has come a long way since its invention by Satoshi Nakamoto – whose true identity has not been revealed – in 2008. His famous “white paper” described a payments system that differs from mainstream financial institutions, relying instead on the public ledger of blockchain technology. technology.
He and his early followers championed the countercultural ethos of “cypherpunk,” with its emphasis on the power of encryption to protect an individual's privacy from the long arm of the state.
However, this vision has struggled to gain traction in the real world. Bitcoin's use as a widespread payments tool has been limited because it is too cumbersome and slow to verify transactions. El Salvador introduced bitcoin as legal tender in 2021, but consumers there have mostly shunned it.
Its limited supply — the code that governs Bitcoin ultimately allows only 21 million tokens to be created — has led many to promote it as a hedge against inflation and the decline of mainstream fiat currencies. This narrative took a hit last year when global inflation rose but the price of Bitcoin fell.
Today, such uses of Bitcoin are rarely mentioned. But its status as a speculative asset, although highly volatile, has been reinforced by its recent rebound and underscored by the launch of funds this week.
The excitement surrounding bitcoin ETFs “reveals just how hollow the narrative around bitcoin is,” said Hillary Allen, a law professor at American University Washington College of Law. “Anyone who knew anything about economics or finance could have told you from day one that bitcoin would never work as a payment system.”
“People were in this to make a quick profit and increase the number,” Allen added, referring to the common boasting among cryptocurrency fans of their market gains.
US regulators, concerned about the scandals that have plagued the cryptocurrency world in recent years, seem inclined to agree.
Although the SEC approved the ETFs, its Chairman Gary Gensler was careful to stress that the agency was prompted to its decision by a US federal appeals court ruling last summer. “We did not approve of Bitcoin,” he said.
He noted that the underlying assets in other ETFs, such as metals, have consumer and industrial uses. “Bitcoin is primarily a speculative and volatile asset that is also used for illicit activities including ransomware, money laundering, sanctions evasion and terrorist financing.”
Fellow SEC commissioner Carolyn Crenshaw, who opposed approval, warned that spot markets remain open to fraud and manipulation.
However, some in the industry see a new respect for bitcoin, whose price has risen nearly 1,300 percent over the past five years, far outpacing other assets.
“I think a lot of the libertarian vision has been scams and fake currencies,” says Andrew Bond, senior research analyst at Rosenblatt Securities, referring to smaller cryptocurrencies that are often launched to make a quick profit for their founders. “If you look at where there has been regulatory action, where there have been problems in the cryptocurrency space, Bitcoin has not.”
Cryptocurrency advocates hope that ETFs will boost the price of Bitcoin because issuers will be required to purchase the token on behalf of their clients. The coins will be held at a custodian, and the issuer will create and redeem shares to represent the owners' stake in the pool.
Jad Qamir, founder of digital asset investment firm Melanion Capital, bought his first bitcoin in 2013. “You had all these technological hurdles,” he said. “I was really worried about losing my phone and as a result losing my bitcoin forever. Now, you are in the hands of the biggest players in finance like BlackRock and Fidelity, and you know that they will take all necessary measures to protect people's assets.
The biggest impact may be on cryptocurrency exchanges that have been the only option for people who want to hold Bitcoin for the long term.
“There will now be a bifurcated market for cryptocurrencies,” said Allison Jimenez, president of Dynamic Securities Analytics, a securities advisory firm. “Those who still want to trade cryptocurrencies will continue to go to these exchanges. Those who want to hold bitcoin as an investment will take the simpler and more straightforward ETF route.
For some, the introduction of regulated third parties such as custodians, exchanges, asset managers and market makers is an example of another emblem of the counterculture being commodified by mainstream finance.
James Angell, an assistant professor at Georgetown University, noted that alcohol and cannabis were previously prohibited, but have since become traded assets.
“In the same way, bitcoin was once seen as an outlier outside the realm of respectable investments, and now it takes its place in the old boys club,” he said. “Wall Street is really good at selling things, they sell anything they can make money on.”
