$BTC is Incompatible with Wall Street's ETF Biz Model...Let's Keep it That Way!
Issue #43 December 11, 2019
The one thing I believe the SEC and U.S. regulators have continued to get right so far is to deny the multiple applications for a Bitcoin ETF (Exchange-Traded Funds). Wall Street increasingly shows interest in the asset class as one by one traditional macro legends like Raoul Pal, Dan Tapiero, etc. follow their early-adopter peers Mike Novogratz, Dan Morehead, etc. on the bandwagon.
I can’t do a better job explaining it myself than this article (which in my opinion holds truer than ever) and is an important read for your context today. The current non-QE (QE4) that is happening in the REPO (bank-to-bank overnight lending market) is a parallel consequence of the impact that Wall Streets’ love of reusing collateral. We don’t need or want that same dynamic coming into the beautifully designed, far more secure, and future system that is Bitcoin and its future relatives.
ETFs are a great way to make short term gains extracting value from the system that isn’t inherently at scale yet. It is a dangerous game of greed, manipulation, and pumping/dumping that would only destroy the true nature of Bitcoin and cryptocurrency. Wall Street needs to learn how to play by the new rules of the game and regulators are right to prevent this from happening at this early stage. In 10 years’ time there may be a real case for ETFs in Bitcoin, but it’s far too soon and dangerous to implement now.
Caitlin Long argues that there’s a fundamental philosophical difference between the cryptocurrency market, where a supply limit may be hardwired into the underlying software protocol, and the existing financial system, where banks and other institutions often reuse (or “rehypothecate”) assets over and over again.
This allows them, effectively and with the approval of the global monetary system’s overseers, to inflate the money supply indefinitely.
“Accounting standards allow rehypothecated assets to be accounted for by multiple owners,” says Long.
In other words, more than one person can claim ownership of the same asset held within the financial system—and it’s perfectly legal for them to do so.
Such practices can lead to confusion. In 2013, when an offer was made to take US company Dole Foods private, initially 33 percent more people claimed to own the company’s shares than there were shares outstanding. This was down to institutions having borrowed the shares from the original owners—and both categories claiming entitlement to the share offer.
We must continue to preserve the unique nature of the Bitcoin network and system since the existing monetary system is more fragile and vulnerable than ever and if we rush to include a new system inside of it for the short term extraction of bonuses, profits, and price pumps, we will ruin something that is truly unique and could not be replicated the same way in the future. By the way, if Bitcoin was to ever die, it would be because of Wall Street co-opting it in their business model versus Wall Street players adopting Bitcoin’s business model as an offramp to their current dying one.
~Chris