X is abuzz that the SEC is set to approve spot Ethereum ETFs late this week or next. This comes about six months after the Bitcoin ETFs were approved.
In this post we discuss how these Ethereum ETFs will impact not only the market, but the way we custody our assets, and Bitcoin/Ethereum maximalism as well.
Price Impact
The ETF approval means that wealthy investors who were hesitant to buy Ethereum (because they didn't want to manage their own private keys) will now be able to invest via an intermediary institution such as Blackrock or Fidelity.
Therefore, money that had previously been on the sidelines will flow into the crypto market causing "price go up" - a higher dollar value for Ethereum and its related assets.
But is this ultimately a good or a bad thing?
Custody vs Self-Custody
The irony of the whole situation is that Bitcoin and Ethereum were originally invented to eliminate the need for intermediaries entirely, so that people could transact with one another peer-to-peer in a trustless manner.
Directly from the Bitcoin whitepaper:
A purely peer-to-peer version of electronic cash would allow online
payments to be sent directly from one party to another without going through a financial institution.
Despite the peer-to-peer vision of crypto, a lot of investors would still prefer to purchase it through a financial institution, probably because the idea of holding it themselves is too foreign and risky.
Obviously these investors don't want to "be their own bank", they just want exposure to an asset that has the potential to skyrocket in value, as Bitcoin and Ethereum have done in the past.
Unfortunately, most people won't learn to self-custody their crypto assets until they have had them stolen, or confiscated by an exchange or financial institution.
Bitcoin vs. Crypto
Some Bitcoiners were sure that American regulators would only approve Bitcoin ETFs, and that none would be authorized for other crypto assets.
The fact that Blackrock, Fidelity, and Grayscale filed applications for Ethereum ETFs shows that there's demand for a variety of crypto assets, not only Bitcoin.
And Ethereum is just the first iteration of smart contract blockchain technology in a very nascent marketplace.
Now we have a number of Ethereum layer 2 solutions, as well as competing ecosystems like Cosmos, Polkadot, MultiversX, Alephium, Solana, etc, all of which are taking their own unique approach to the scalability challenge.
At the end of the day, people will choose blockchains that are user-friendly, censorship-resistant, cheap, and reliable. That is where the real economic activity will end up, and ultimately where the capital will flow.
Freedom Money
The beauty of blockchain technology is that we can choose to use whatever cryptocurrency we want to. If a blockchain is sufficiently decentralized, it cannot be shutdown by any corporation or government.
The Ethereum ETF approvals indicate that investors are interested in a variety of crypto assets, not only Bitcoin. However, most of us will only self-custody our funds after learning some tough lessons.
We are going to witness the birth of many more blockchains in the coming years and decades. Eventually the tokens that power these blockchains will be the money we use in our daily transactions.
If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the HIVE blockchain. You can also follow me on InLeo for more frequent updates.
Until next time...
Resources
Ethereum Coin Image [1]