Bitcoin is going mainstream

Throughout most of 2023, the Bitcoin landscape has been captivated by a recurring narrative—the anticipation of SEC approval for a Bitcoin spot ETF. The prevailing sentiment surrounding this development has been overwhelmingly positive, with experts, influencers, and enthusiasts alike viewing it as a pivotal moment that will elevate Bitcoin’s status as a store of value and usher in a new phase of bullish market activity ahead of next year’s halving event.

For those engaged on the X platform (previously known as Twitter), recent months have resembled a dramatic reality TV series, replete with spot ETF-related lawsuits, resubmitted applications, delays, speculations, and more. Just last week, a deadline loomed for the SEC to make a decision—approval, rejection, or postponement—and true to form, they chose the latter option.

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Breaking news emerged today with Coinbase receiving the green light to offer Bitcoin and Ethereum futures to U.S. retail investors. In everyday language, this translates to shorting—enabling individuals to bet against Bitcoin’s value. While this practice had been possible elsewhere globally, its availability to U.S. retail investors is a significant development. This further complicates an evolving landscape where futures have gained approval, while spot ETFs have not.

The question arises: why are these events of significance to the Bitcoin community, and what do they entail for Bitcoin enthusiasts? These occurrences signify the dual entry of U.S. institutional investment and market manipulation into the realm of Bitcoin, an inevitability that we must come to terms with.

Futures trading involves borrowing Bitcoin to sell, hoping that its value decreases, allowing traders to repurchase it at a lower price, thus generating profit. This approach adds downward pressure on prices and fosters negativity in the market—these traders gain when prices fall. Moreover, this process is purely electronic; these investors never hold actual Bitcoin but only trade on paper, contributing nothing to its adoption, merely dragging it down with speculative pessimism.

Conversely, the spot ETF targets institutions—funds, financial managers, and family offices. Unlike futures, a spot ETF involves acquiring actual Bitcoin, not IOUs. The substantial demand stemming from the trillions managed by these entities could trigger considerable price fluctuations, potentially driving Bitcoin’s value to hundreds of thousands of dollars.

While those knowledgeable about the precariousness of buying Bitcoin at its current fiat valuation recognize that this era is fleeting, the arrival of these developments will hasten its conclusion, especially with the approval of even one of these mechanisms.

So, what determines the approval of one and the rejection of the other? And why are long-standing Bitcoin advocates enthusiastic about these institutional players entering the scene? Do they all share the same motivations?

As with any community, individuals flock to Bitcoin for diverse reasons—some for its role as a digital gold hedge against fiat, others for the potential to amass generational wealth, and some for the fundamental principles embodied by trustless, permissionless, neutral digital currency.

Regardless of the rationale that initially drew us to Bitcoin, we must come to terms with the imminent change. This influx of investment won’t merely introduce volatility and value appreciation; it will also drive increased development, evolving use cases, and a new set of technical hurdles. Embracing this transformation is crucial as we navigate Bitcoin’s future landscape.

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