Cryptocurrency ETFs, A Threat To Your Future.

A while ago, while reading the news that the US SEC had delayed making its decision on some Ethereum ETFs until May 2024, I was reflecting on how in recent years, cryptocurrencies have aroused the interest of traditional investors seeking to take advantage its profitability and diversification potential. And how, to facilitate access to this market, ETFs have emerged or turned to, which are nothing more than exchange-traded funds that follow the price of one or several cryptocurrencies, without the need to own them directly. These offer some advantages, such as simplicity, liquidity, regulation and the reduction of costs and risks associated with the management of cryptoassets. However, they also involve some drawbacks and dangers, which could compromise the future of cryptocurrencies and their original essence.

📌 SEC - United States Securities and Exchange Commission. It is an agency of the federal government that has primary responsibility for enforcing the federal securities laws and regulating this industry, the nation's financial markets, as well as the stock, options, and other electronic securities markets.

One of the main problems with ETFs is that they distance users from the true nature of cryptocurrencies, which is to be autonomous digital assets, which do not depend on any central authority or intermediary. By investing in an ETF, users do not actually own the cryptocurrencies, but instead delegate their custody and management to an entity that represents them through shares.

This implies that users lose control and sovereignty over their assets, and are exposed to the risks of trusting a third party, who could suffer solvency problems, fraud, hacking or bankruptcy. In addition, users give up the benefits of owning cryptocurrencies, such as the possibility of using them as a means of payment, accessing decentralized financial services (DeFi) or participating in the governance and development of networks.

Another risk of ETFs is that they encourage market concentration and manipulation, by allowing large companies, corporations, governments and other actors with interests contrary to cryptocurrencies to take control of a large part of the supply and demand of the same. This would negatively affect the volatility, liquidity, transparency and efficiency of the crypto market and generate distortions in its price and valuation. In addition, it could pose a threat to the security and decentralization of cryptocurrency networks, if these actors manage to influence or attack the nodes, miners or validators that support them.

A friend commented or criticized me on some occasion "accusing" me of being a detractor of ETFs, I think I must agree with her, regardless of all the benefits they may have, they will eventually distort the purpose and vision of cryptocurrencies, which is that of offer an alternative to the traditional financial system, based on trust, transparency, inclusion and innovation. By integrating into the traditional financial system, they will lose part of their essence and their disruptive potential; they will be subject to the rules and regulations of the authorities and organizations that control said system, which would be fatal.

This could limit the freedom, creativity and diversity of cryptocurrency users and investors, slowing their development and innovation. In addition, it can lead to a loss of interest and confidence in cryptocurrencies if ETFs fail to meet the expectations and needs of users, or if they suffer from performance, security or legality problems.

ETFs may be very attractive to traditional investors looking for a simple, liquid and regulated way to gain exposure to this market without having to interact directly with them, however, my biggest concern is that they involve a series of risks and dangers that could negatively affect the future of cryptocurrencies and their original essence. What do you think? I read them in the comments.

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💖 Originally Posted: Publish0x