In February, I wrote an article about a Bitcoin Maximalist that moved his stack to ETFs and called it “safer.”
The Bitcoin Maximalist was PlanB, with the X username: 100trillionUSD, and here's the article.
It was surprising that any Maxi would do that, but a recent report highlights that this could be happening more than we know, especially now that the securities and exchange commission (SEC) of the United States had greenlighted in-kind creations and redemptions.
Large Bitcoin holders who accumulated the cryptocurrency early, commonly known as whales, are increasingly moving their holdings into exchange-traded funds (ETFs), with asset managers such as BlackRock actively courting them.
In an interview with Bloomberg, Robbie Mitchnick, BlackRock’s head of digital assets, said the company has already facilitated more than $3 billion worth of these conversions into its iShares spot Bitcoin ETF (IBIT).
After years of self-custody, many whales are recognizing “the convenience of being able to hold their exposure within their existing financial adviser or private-bank relationship,” Mitchnick said.
It's funny I should come across this report, because just a while ago, I saw a chart that showed that Blackrock’s Bitcoin ETF, $IBIT, is the fastest growing ETF to reach $70 billion, in 341 days.
With Bitcoin whales moving into it, the traditional asset stands to break more records.
Is this good or bad?
This is something I've discussed pretty much a lot, though not particularly with the focus on capital moving out into ETFs from people within the ecosystem.
It has always mostly been about new onboards coming in to buy out the industry's old-timers, but when the reality is a move away from self-custody to giving control to centralized, traditional asset managers, it's a little more concerning.
One might wonder, how's it any different?
Well here's how.
If Bitcoin holders trade BTC directly for a Bitcoin ETF such as IBIT, the capital effectively becomes an idle capital controlled by Blackrock.
If newer investors buy Blackrock’s ETF, and Blackrock in turn buys bitcoin from the holders, the capital remains active and can be reinvested into the crypto ecosystem.
In the first scenario, they lose their Bitcoin and sole-control of their invested capital, while in the second, they only lose control exposure to Bitcoin but still control their capital — provided said capital isn't off-ramped.
The trading of control for convenience that is on going now is particularly more concerning because traditional companies are already buying up bitcoin for treasury holdings, and if holders are moving into ETFs and giving up control, that boosts the speed at which TradeFi will have majority control over Bitcoin's economy.
Many believe that since BTC isn't a governance asset, that it doesn't matter, but they fail to realize that BTC limited supply being controlled by TradeFi means that transactions will be abstracted off of Bitcoin, onto a layer that is permissioned. Miners will lose revenue and slowly fold and centralized finance will win over the asset that was set to break their grip on global finance.
Maybe people need to be reminded why crypto exists in the first place and that convenience that takes away your control isn't worth having.