Bitcoin ETF: A Decade Of Struggle For Legitimacy

The crypto revolution was finally taken to new heights when the SEC approved 11 Bitcoin spot ETFs in January 2024. Global investors flooded in like never seen before, adding almost $5 billion of inflows on the first day of trading. As a result, the crossover between traditional finance and digital assets is now firmly established, and a new door of opportunities for crypto will open as the market continues to mature. This marks the end of a decade-long struggle for legitimacy, showcasing the success of progress not only in blockchain technology itself but also in the public’s perception of money. Crypto is here to stay.

In the early years of Bitcoin, many native crypto investors believed that Wall Street needed Bitcoin but not vice versa. This one-way love affair was true for a while, but mostly because of the lack of regulatory clarity worldwide.

The crossover from traditional finance to crypto has always been limited and cautious as every time there was a market correction, experts from Wall Street were more than eager to declare “Bitcoin is dead,’ or ‘the bubble finally burst”. In fact, the assumed death of Bitcoin occurred almost more than 400 times according to research on Binance, but every revival and bull run didn’t swing skepticism of this emerging technology. Traditional finance seems to have finally woken up and accepted that the world has changed since the last global financial crisis and is ready for crypto.

But now that the Bitcoin ETF has arrived, the crypto industry celebrates the milestone with mixed feelings. Indeed, it was quite a journey to get there. ETF approval started back in 2013 with the launch of the Grayscale Bitcoin Trust. Gemini’s spot application in the same year was eventually rejected in 2017. Then, the first futures ETF launched in 2021, paving the way for an eventual spot approval this month.

Since the first approval, many early crypto investors pushed back against the spot ETF. They continue to hold onto the belief of ‘not your keys, not your coins.’ Ultimately their concern is that mainstream institutionalization that these ETFs represent will challenge the decentralization concept held dearly by many in the crypto community.

Bitcoin investors are right to be cautious about centralization, and we are indeed heading in a new direction by embracing traditional finance. Rather than holding on to stale beliefs, it’s now time for the Bitcoin industry to transform the existing outdated infrastructure and focus on welcoming more people to enjoy the benefits of digital assets.

We should not forget that one of the fundamental purpose of Bitcoin was financial inclusion and to help the unbanked. But now with the high cost of transaction fees on the Bitcoin network and the increasingly monopolized mining industry, the playing field has tilted to favor those with the most resources and scale of operations.

That said, Bitcoin has transformed into a stronger store of value attracting both crypto and traditional finance, and Institutional investors are rushing in to amass as much crypto as fast as they can. All this is great for the industry to grow and mature, but the people that the technology was designed to help in the first place remain more or less as stuck as before.

Bitcoin has also faced numerous other challenges stemming from the technical, such as the threat of numerous forks and debates over increasing block size, to bans imposed by a number of nation-states. With the approval of the spot ETFs, the global regulatory environment has turned a corner, now feeling much more open and accepting of Bitcoin investors.

As Bitcoin becomes increasingly adopted by the mainstream in the form of various financial products, it delivers a rare opportunity to directly help those in need. From payment firms to green energy transitions, Bitcoin can help struggling economies by backing their foreign currency reserves and bringing in new investment opportunities through Security Token Offerings and Real-World Asset products. Other innovations can include the issuance of tokens that are pegged to Bitcoin or stablecoins for use in financial applications. The list goes on where Bitcoin can make an impact in people’s day-to-day lives by including them in a globally connected digital economy facilitated by blockchain technology.

Looking ahead to the next decade, the revolution to improve lives around the world through cryptocurrencies will continue. This industry, with Bitcoin at the helm, will continue to reshape an understanding of the changing macroeconomic environment, geopolitical risks, and most importantly the challenging concept of money. The industry has achieved stunning growth and is already impacting the way we interact in society. Changing the world sometimes feels like a movie where you don’t know what the ending is, but it is every small step you take that makes you feel hopeful is all worthwhile. 

This is a guest post by Yiwei Wang, with contribution from Nick Ruck, COO of ContentFi Labs. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

8 February 2024 17:00