Spot ETFs on Crypto: a Sneaky Tool of Control?

30 May 2024

If you can’t beat them, join them. Most likely, such thoughts are coming to the minds of those watching the approval process for spot crypto ETFs.

First, the SEC approved spot Bitcoin ETFs. Spot Ethereum ETFs are about to follow, and the market already anticipates that spot Solana ETFs may be coming next…

The well-known crypto pundit, Arthur Hayes, has recently noted that bankers would like to centralize crypto and make it similar to any other asset.

Of course, Hayes, or any other analyst, cannot be viewed as the source of ultimate truth. However, we at Bitbanker (вариант: our analyst team, короче shameless plug, как договаривались) believe that the theory looks plausible.

While the “control theory” may look like just another conspiracy theory, there are some valid points that support it. Let’s take a look at it in more detail.

By this time, it is obvious that the SEC cannot ban crypto. Crypto has gained “critical mass” and found its place in portfolios of financial firms and private investors. This is especially important in the election year as crypto holders are also voters.

Financial firms love commissions more than anything else. The commission business is more lucrative compared to the loan business. With loans, you need a strong analytical and risk team, sophisticated software, and a bit of luck to navigate the complex economic landscape.

In the commissions’ case, you get a ready-made stream of money after the initial investment in paperwork and a couple of guys managing your fund. Not surprisingly, financial firms are ready to develop new funds for all popular products, including crypto.

Taking a look at the big picture, U.S. regulators want to take crypto under greater control. The potential accumulation of crypto in funds managed by American financial companies looks like an elegant solution to this problem.

In this light, the creation of spot crypto ETFs serves two purposes. U.S. regulators push more crypto into the U.S.-regulated funds that will comply with all U.S. rules, including sanctions. Meanwhile, financial firms reap commission profits from their large user base. Looks like everyone is winning, but is this deal good for crypto fans?

Spot crypto ETFs are a new reality of crypto markets, whether you like them or not. Ultimately, spot Ethereum ETFs will get approved, bringing additional demand for ETH from the traditional financial markets.

Most likely, these ETFs will be followed by others as financial firms would like to capitalize on the success of the spot Bitcoin ETFs and spot Ethereum ETFs. Solana looks like an obvious target after the approval of spot Ethereum ETFs. In addition, some financial firms may like to craft funds dedicated to meme coins, although this would be a trickier exercise. Overall, the potential crypto ETF boom would provide additional support to crypto markets, although direct support would be limited to a few big names.

For those investing in crypto, buying it directly will always remain the best way to navigate crypto markets. There’s zero reason to pay someone to hold your crypto when you can be holding it yourself.