Behind the universe of crypto exchanges there are dark worlds, for ordinary people there is no understanding of why the a delay in ETFs and the implications of their approval. An immediate observation with a bit of simple math deduces a simple reality, ETFs hurt Bitcoin Traders.
Image generated by Microsoft Bing image generator powered by DALL·E 3 Prompt: Man trader entering a house with the symbol of several altcoins on his door like litecoin and ada of cardano, after leaving another house with the symbol of bitcoin on his door, in a swampy street, sky in penumbras. Super realistic style, 4K.
What could the approval of Bitcoin ETFs mean?
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Around the Bitcoin ETFs, there is a great expectation several institutional investors have their funds ready to enter and provide liquidity. It is that without a doubt Bitcoin is becoming an increasingly important borderless store of value, so everyone wants a piece of the pie, and the FOMO takes over many. Obviously, the demand will raise the price of Bitcoin, although no one has predicted how far, the largest speculators will several 100K, and this expected increase will bring the current holders of Bitcoin the following possible scenarios:
- Those who bought bitcoin on their previous ATH and have been patient enough to wait for a new rally, will sell with a profit that rewards the wait.
- The price increase will be proportionally related to the increase in network mining commissions, to the point that making a transaction will be very expensive for a retail user. In turn, L2 solutions such as lighting will be the only way to use them for ordinary users.
- The operators of payment channels in the L2 solutions will have to include a higher fee for the processes of creating or closing channels in the case of lighting, or transmitting a status update to the Bitcoin network.
Obviously, these mentioned aspects will take bitcoin away from ordinary users and it will almost be of use for institutions. In addition, the increase in the price also triggers the capitalization of the underlying market, this means that it will be necessary to enter or withdraw more money to move the price, decreasing volatility. To get an idea at a price of 100K the market capitalization of bitcoin with the current circulation is 1,953,319,943,798 USD, so to move by 5% its price needs to move 97,665,997,189 USD which is much more than the current capitalization of Theter USDT which occupies the third place in order of market capitalization.
With a high market capitalization in bitcoin, its volatility is drastically reduced, so it potentially becomes a near-stable asset, replacing in practical effects the use of other stable currencies such as the USDT. This undoubtedly represents a radical change in the universal game of values.
What does a 100K bitcoin mean for a trader?
As we expressed above, the high capitalization is accompanied by greater stability in the price, this makes bitcoin a reference value in exchange operations. Therefore, it would no longer be a speculative asset and the exchange moves would move towards other assets of lower capitalization and an obvious fever of new meme-coins. It is no coincidence that after Bitcoin reaches its ATH, an altcoin season is triggered by a bleed-out. I imagine that the Pepe coiners are grinding their teeth before a future scenario.
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Therefore, the role that Bitcoin plays today as a volatile asset will be delegated to other assets, because the objective of traders is to make profits, and a stable asset is the object of reserve, this will be the case of more use for Bitcoin. The inputs and outputs of the exchanges will be in other assets or in Bitcoin lighting because only the big players will be able to handle the withdrawal and network commissions. The role of Bitcoin as a store of value will undoubtedly be and even dangerous, because it will occupy spaces that stable issuers hold today.
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