No updated information is available, but it is now known that investors have pumped at least $1.9 billion into new exchange-traded funds tracking cryptocurrencies in the first three days of trading. Most bullish estimates predict as much as $100 billion will flow into Bitcoin funds by the end of the year.
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That’s a lot of pent-up demand, surpassing the latest record inflows of $1.2 billion within three days in 2021… which also went into a bitcoin-based product, the ProShares Bitcoin Strategy ETF (which tracks bitcoin futures rather than its spot price), Reuters. mentioned.
A number of prominent financial firms, including BlackRock, Fidelity, and Franklin Templeton, have been lined up to launch Bitcoin ETFs, and are now also considering Ethereum (ETH) funds. However, Sommer seems ready to write it all off.
“FOMO is the main reason people put money into Bitcoin, which remains highly speculative, difficult to categorize and without an immediately identifiable economic function,” the New York Times columnist wrote in his latest issue of the Strategies newsletter, referring to the papers. American finance and stock exchanges. SEC Anti-FOMO Bulletin.
FOMO, also known as fear of missing out, is definitely a part of investing in cryptocurrencies. For example, it is the main driver behind diginates chasing the highs of coins like BONK or dogwifat, which really serve little economic function beyond speculation.
But to simply write off Bitcoin as a spin of the roulette wheel with $800 billion on the table is to willingly mislead oneself. You don’t have to personally believe what Bitcoin users believe to take their arguments seriously, for fear of ridicule or ostracism (FOMOO) by your crypto-skeptical peers, Jeff.
To be fair, Sommer did praise the technology behind Bitcoin, i.e. blockchain, to hedge his own argument. For lightness of shade:
“Bitcoin is a serious proposition, in terms of its underlying architecture. The use of blockchain, its decentralized peer-to-peer structure, and its complex mathematical code demand respect. The concepts embedded in Bitcoin and other cryptocurrencies could have real-world significance at some point…”
This wasn’t Sommer’s only original and novel idea, he also consistently argued that cryptocurrency is a “misnomer” because cryptocurrencies, while perhaps one day having “real-world” utility somewhere, aren’t really “currencies.” He said the comparison between Bitcoin and gold is incorrect because gold has a historical “cache.”
As the great and powerful Satoshi Nakamoto once said: “If you don’t believe me or don’t understand it, I don’t have time to try to convince you, sorry.” At this point, it’s not even worth addressing these very tired arguments, which seasoned journalists seem to make every time cryptocurrencies score some victory.
But given that it’s fairly new, I’ll try my best to update Sommer on why interest in Bitcoin ETFs is more than just FOMO.
First, there is the philosophical proposition of Bitcoin – the idea that there should be a stateless, global monetary network available to everyone. Often called the libertarian dream, Bitcoin’s vision is so simple that it actually falls neatly into a range of political philosophies — from globalist neoconservatism to historical Marxism, but it’s not anything truly authoritarian.
Again, you don’t have to buy into the growing trend toward populism to care. Many people feel the prevalence of corporate and government surveillance; The widening gap in economic inequality; And other geopolitical issues for which something like Bitcoin, which empowers everyone without asking anything from any particular user in return, is a powerful symbol to say the least.
Second, there is the fact that Bitcoin is one of the most successful economic investments on record. It may not be the best performing asset every year, and many people have certainly lost money trading it, but there is no denying the meteoric gains that Bitcoin has made over the past decade and a half.
This is where the idea of “hodling” comes in, which recommends people buy and hold Bitcoin over a long period of time, because even if the ever-volatile Bitcoin goes down, those are just paper losses until you sell it. Bitcoin ETFs help a wide range of individual and institutional buyers access BTC, typically through vehicles like retirement accounts or corporate Treasuries that are likely to be held for years if not decades.
It is true that the price of Bitcoin is not guaranteed, and may even drop to $0. And it’s true, as Sommer points out, there are other ways to learn about cryptocurrencies over traditional methods, such as buying other indexes that invest in crypto-related stocks, such as Coinbase, MicroStrategy, or several publicly listed mining companies.
Simply put, there is something powerful about the idea of actually owning an asset that cannot be seized. Spot Bitcoin ETFs are a poor approximation of this since buyers of the ETFs never acquire Bitcoin.
But Sommer distances himself from that idea early on, trying to convince his readers that the massive interest in Bitcoin just demonstrated by the launch of 11 Bitcoin ETFs this month is just FOMO. The sad thing is that the argument also works in reverse: even if demand for Bitcoin is just a matter of social contagion, so is skepticism, because you need to hear something to stay away from it. So check your sources
Correction (January 19, 2024): Removes reference to in-kind redemptions, which were not part of the SEC process.