Are ‘ETF Paper Bitcoins’ Suppressing BTC Prices? Analyst Provides Answers
28 Outubro 2024 - 7:30PM
NEWSBTC
In a new YouTube video titled “There Is No ETF Paper Bitcoin,” Fred
Krueger, an investor at the crypto hedge fund 2718.fund, delved
into the growing concerns surrounding US spot Bitcoin
Exchange-Traded Funds (ETFs) and their impact on the
cryptocurrency’s price. Krueger aimed to dispel the fear,
uncertainty, and doubt (FUD) that have been circulating about
“paper Bitcoin”—the notion that ETFs might be selling Bitcoin they
do not actually possess—and to explain why Bitcoin’s price has not
surged as dramatically as some might expect, despite significant
ETF purchases. Krueger began his analysis by acknowledging the
prevalent skepticism in the market. “There’s all this paper
Bitcoin, and ETFs don’t really have the Bitcoin, and if they were
buying all this Bitcoin, how come Bitcoin price is not higher?” he
stated, encapsulating the core concerns of many investors.
Historically, the concept of “paper Bitcoin” has been associated
with exchanges that sold Bitcoin to customers without actually
possessing the underlying assets. Krueger highlighted several
high-profile instances where this practice led to significant
losses for investors. He cited the case of Mt. Gox. Another example
he provided was QuadrigaCX, a Canadian exchange that collapsed
under mysterious circumstances. Founder Gerald Cotten allegedly
died in India, taking with him the private keys to the exchange’s
cold wallets, effectively locking away customer funds. “A lot of
Canadians lost all their Bitcoin on this Quad exchange,” Krueger
noted. Are “ETF Paper Bitcoin” Real? These historical events have
contributed to the current apprehension about ETFs and the
possibility that they might be engaging in similar
practices—selling Bitcoin they do not actually hold, thereby
suppressing BTC’s price through artificial supply. However, Krueger
argued that ETFs, particularly those managed by established
financial institutions, operate under a fundamentally different
framework compared to unregulated exchanges. Related Reading:
Bitcoin Bullish Outlook Confirmed By Critical Data – STH
Overheating? Focusing on two leading ETFs—IBIT, the BlackRock ETF,
and FBTC, the Fidelity ETF—Krueger emphasized the stringent
regulatory oversight governing these entities. “Both of these ETFs
are subject to very strict regulatory oversight, including the SEC
but also other agencies in the US,” he stated. This comprehensive
oversight includes requirements for complete transparency, regular
audits, and the use of third-party custodians for asset
verification. “They literally have to get a receipt of an asset
from a third-party custodian,” Krueger added. In the case of IBIT,
Coinbase serves as the third-party custodian. “Coinbase is itself a
public company that is audited,” Krueger pointed out, noting that
the public nature of Coinbase adds an additional layer of scrutiny
and accountability. IBIT conducts audits of Coinbase, and both
entities are subject to audits by the SEC and other regulatory
bodies. For FBTC, custody is handled by Fidelity Digital Assets, a
separate entity within Fidelity that specializes in the custody of
digital assets, thereby ensuring specialized oversight and
management. “The issuers of IBIT and FBTC are BlackRock and
Fidelity, two of the largest and oldest financial institutions, and
they have a vested interest in maintaining their reputation,”
Krueger asserted. “Their reputation is at stake, and this is a big
deal,” he emphasized, suggesting that these institutions would not
risk their credibility by engaging in the sale of non-existent
Bitcoin. Krueger contrasted BlackRock with entities like QuadrigaCX
to underscore the disparity in regulatory compliance and
operational scale. “BlackRock is highly regulated […] BlackRock has
a robust corporate governance structure with committees for audit,
risk, and compliance and very extensive internal controls,” Krueger
added. Related Reading: Bitcoin To Hit $125,000 By Year-End If
Trump Wins, Says Standard Chartered Addressing the core concern
about ETFs holding “paper Bitcoin,” Krueger provided specific data
to refute this notion. “The reality is the ETFs have zero pure
paper Bitcoin,” he stated unequivocally. He highlighted that IBIT
holds approximately 403,000 actual Bitcoins, while FBTC holds about
185,000 actual Bitcoins. “Together, these two ETFs hold almost 3%
of the world’s total Bitcoin, or 588,000 Bitcoins—I think it’s
2.9%,” he calculated. Krueger acknowledged that some skeptics have
attempted to analyze Bitcoin movement between specific dates to
challenge these holdings. However, he emphasized that the facts are
clear and verifiable. “We know how much Bitcoin these ETFs have; we
know that it’s accounted for, and that’s a reality,” he insisted.
Turning to the question of why Bitcoin’s price has not increased
more dramatically despite significant ETF inflows, Krueger offered
a nuanced explanation. He noted that Bitcoin is, in fact, up by 60%
since the introduction of the ETFs, translating to a $600 billion
increase in market capitalization. This growth has been fueled by
approximately $20 billion in net inflows into the ETFs, resulting
in a price multiplier effect of about 30x. “That’s historically
about normal, maybe a little on the low side but not terribly so,”
he assessed. Krueger attributed the moderation in Bitcoin’s price
growth to substantial selling pressures from various sources.
“There’s been a bunch of selling,” he explained. He detailed that
Germany sold $3 billion worth of Bitcoin as well as Mt. Gox
holdings. Additionally, FTX sold its GBTC (Grayscale Bitcoin Trust)
stake earlier in the year, and the Digital Currency Group (DCG)
sold assets to resolve lawsuits. “We had a lot of selling,” Krueger
summarized. Speculating on the potential impact absent these
selling pressures, Krueger suggested that Bitcoin’s price could
have been significantly higher. “We probably would be at $90k if
there wasn’t any selling,” he posited. At press time, BTC traded at
$68,752. Featured image created with DALL.E, chart from
TradingView.com
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