ETF: The Poison Of Cryptocurrencies.

A while ago I read something like this in the news (it is not literal): "...ETF issuing firms buy about 4000 Bitcoin daily in the last month, approximately 5 Bitcoin for each Bitcoin that is mined...". I also tell you that currently about 900 Bitcoin are mined daily. This increasing excessive rate at which they acquire Bitcoin, in my view, is a reminder that not everything is rosy in the crypto ecosystem and that ETFs could be a latent threat that could endanger the essence, functioning and future of cryptocurrencies. But let's go in parts.

ETFs or exchange-traded funds are financial instruments that replicate the behavior of an asset, index or sector, and that are traded on stock markets as if they were shares. Bitcoin ETFs are those that track the price of the cryptocurrency, but do not involve actual possession of the bitcoins, but are based on derivative contracts or third-party custody. At first glance, Bitcoin ETFs might seem like good news for the crypto ecosystem, as they make it easier for investors to access and expose themselves to this new asset class, without having to deal with the risks and complications of purchasing, storing and transfer bitcoins directly. But they will also lead to an imbalance of power in the cryptocurrency market.

And the cryptocurrency market is characterized by being an open, inclusive and diverse space, where anyone can participate, create and benefit from the opportunities offered by blockchain technology and digital currencies. However, the emergence of Bitcoin ETFs could upset that balance by generating distortion and inequality in the market.

It is true that Bitcoin ETFs will attract a large number of institutional investors, who have large amounts of capital, resources and experience, and who are looking for an easy, fast and secure way to invest in Bitcoin, without having to worry about the aspects technical, legal or regulatory aspects involved in the direct management of cryptocurrency. But on the other hand, they could discourage and displace individual investors and users, who have driven the development and adoption of Bitcoin since its inception, and who face greater barriers and difficulties in accessing the cryptocurrency market, such as lack of education, information, trust or infrastructure.

In this way, Bitcoin ETFs could cause a concentration of power and influence in the cryptocurrency market, in the hands of a few institutional actors, who could impose their interests, criteria and conditions and/or manipulate the price, supply and the demand for Bitcoin, to the detriment of the majority of ecosystem participants.

Let us remember that the fundamental principle of Bitcoin is based on DECENTRALIZATION. This means that there is no central authority or intermediary that controls or regulates the issuance, distribution, transaction or verification of bitcoins, but everything is done collectively and by consensus by the nodes of the network, which are the computers. that run the Bitcoin protocol and store a copy of its public, distributed ledger, called a blockchain.

Bitcoin ETFs could jeopardize this principle by leading to centralization and intermediation of ownership and control of the cryptocurrency. This is because Bitcoin ETFs do not involve actual ownership of bitcoins, but instead rely on derivative contracts or third-party custody. Investors who purchase Bitcoin ETFs do not have the right or responsibility to manage their own bitcoins, but instead delegate this function to the ETF provider, which is responsible for buying, selling, storing and transferring the bitcoins they back. the bottom.

In this way, Bitcoin ETFs could concentrate ownership and control of the cryptocurrency in a few entities, which would have the power to decide on the destination and use of bitcoins, and which could violate privacy, security and sovereignty of investors, by exposing them to risks such as theft, loss, fraud, censorship or confiscation of their funds.

Bitcoin is based on a consensus mechanism called proof of work (PoW), which consists of the nodes of the network competing with each other to solve complex mathematical problems, which allow them to validate transactions and generate new blocks of data, which are added to the blockchain. The node that solves the problem first receives a reward in the form of bitcoins, which are created in a limited and predictable way, up to a maximum of 21 million units. This mechanism guarantees the security, sovereignty and innovation of the Bitcoin network, by encouraging the participation and consensus of the nodes, which are the ones who maintain and protect the operation and integrity of the system, and who are the ones who can propose and accept changes and improvements in the protocol.

However, Bitcoin ETFs could negatively impact this mechanism by reducing the number and diversity of network nodes, and by decoupling investment from participation. This is because demand and interest in directly purchasing, storing and transferring bitcoins could decrease, which could disincentivize and displace the nodes that perform these functions, and that contribute to the security and sovereignty of the network. Furthermore, Bitcoin ETFs could increase the gap and conflict between the interests of investors and those of users, making network innovation and development more difficult and hindering.

I hope I'm wrong, but I still think that Bitcoin ETFs or any other cryptocurrency could have a negative and detrimental impact on the crypto ecosystem, by altering, as I mentioned at the beginning, the balance of power in the cryptocurrency market, concentrating on a few economic actors take full ownership and control and threaten the security, sovereignty and innovation of the Bitcoin network.

It is important that as investors and users we are aware of the risks and disadvantages that Bitcoin ETFs entail, and that we opt for more direct, safe and responsible ways to invest and participate in a crypto universe that respects and promotes its fundamental principles and values.

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✍ Originally Posted: Publish0x