Sirwin
Sirwin

Pros and Cons of ETFs and Why they are Better than Self-Custody for most People

By unhedge0x | Crypto & Greed | 13 Feb 2024


Bitcoin is gaining mainstream adoption after the 11 ETFs were approved by the SEC on January 10, 2024.

Before I go in-depth:

⚠️ The ETF-ied Boomers and Bitcoin Marxists will be triggered after reading this piece so buckle up and chill.

The effects of ETFs are undermined, as I inform you, "ETFs go against the ethos of Bitcoin", as Bitcoin was designed with principles in code (decentralization).

Bitcoin Marxists are always overwhelmed with the principles of Bitcoin as our political monetary system is flawed. In their wake, opponents have dismissed the inscribed principles of Bitcoin.

Institutionalizing Bitcoin lays a formal ground for opponents to benefit from this monetary system.

It thus comes at a cost for the Bitcoin Community to keep educating the masses about the impact of ETFs:

 

Pros:

1- Accessibility: This makes it easier for nocoiners to virtually invest in bitcoin without the need to own actual bitcoins.

2- Liquidity: The approved ETF open new liquidity as market participants increase and as billions of dollars are poured into the bitcoin market.

3- Regulatory Clarity: Having a regulated Bitcoin ETF provide some degree of clarity in terms of regulations, this attract more institutional investors who were too scared to jump into the ocean waters of Bitcoin.

4- Safety: Holding an underlying ETF through a trusted fund manager like BlackRock is safer for people who find it hard to deal with self-custody. Professional custodians are well secured than individuals having to deal publicly with Bitcoin. The safety score of lost bitcoins by custodians is higher than individuals. Nocoiners also benefit from dealing with the technical aspect of securing Bitcoin.

5- Taxes: Dealing with taxes, ETFs are tax efficient and easier for your local account agent . Because, your spreadsheet for an audit is cumbersome as compare to an institutionalised tax form.

6- Death: Inheritance after you're gone from your custodian is easier with ETFs, than your muneeb wallet. You know, an estimate of 5 million bitcoins have been lost due to self custody, also, a number of people have died untimely without declaring their possessions to their love once.

 

Cons:

1- Transferability: Moving your coins from your custodian to your nephew in Ukraine will undergo paperwork and only will be done within workings hours and days.

2- Liquidity: Trading your shares off BlackRock need thorough scrutiny (risk of surveillance)

3- Borderline: ETFs are overtly centralized financial products limited to a region due to regulatory clarity. Issuing ETFs from one country to another is combursome as they need to be regulatory compliant.

4- IOU: The IOU is the acronym for "I Owe You", your bank account deposit is always credited with IOU note, as banks give almost all your money in waves of loans. This is very common with centralized entities and ETFs are in custody of these entities. So you're basically not holding the underlying assets (Bitcoin).

5- Centralization: Bitcoin was created with the principle of decentralization, with spot Bitcoin ETFs, you're handing control over to a centralized authority. This goes against the ethos of Bitcoin.

6- Manipulation: ETFs have high price manipulation than original Bitcoin as ETFs are overtly centralized.

7- Lack of Direct Bitcoin Benefit: ETF holders do not benefit from direct Bitcoin advantages from DeFi provided services like lending, borrowing, staking and microtransaction.

8- Volatility: As I am typing this line, Bitcoin is highly volatile given the ETF narrative has exposed unsuspecting investors. We now see a scenario of FOMO in the market.

9- Management: ETFs come with management fees and expenses potentially reducing appreciation as compared to direct ownership of Bitcoin.

Consider marriage a zero sum game, in the case of divorce, it likely going to be easier managing your your ETF between couples.

Pros and Cons of ETFs will continue as I keep on typing, if you have any, you should drop them below for our fellow readers.

However, the more I think of ETFs the more I think of fiat, there's actually no difference holding these ETFs than cash, as these ETFs undermine the ethos of Bitcoin as they're overtly centralized products. It is for the masses to protect the fruits of their labour.

 

Whatever, the spot bitcoin ETF have been approved, so take this opportunity to explore bitcoin transforming the Global South.

 

Cheers ✍️🙏

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For a prosperous crypto adventure, stick around for another informative post.

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unhedge0x
unhedge0x

I am a Cryptocurrency enthusiast and a Blockchain believer. Visionary on how Digital Assets will impact the lives of the unbanked and underbanked. I am not an investment genius but a guy who believes in the fundamentals of Bitcoin and the Blockchain 😁 ✍


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