This strategist says ETFs are bad for Bitcoin: ‘I’m very worried’

Bitcoin ETFs have caused the asset to surge and brought it closer to traditional finance.
However, that jeopardises Bitcoin’s original mission, warns Jim Bianco.
He echoed concerns raised by Arthur Hayes.

The Wall Street creep puts Bitcoin at risk of losing its soul, according to Jim Bianco, president of Bianco Research.

Rather than realising founder Satoshi Nakamoto’s vision of creating an alternative financial system, Bitcoin is failing to differentiate itself from financial players and is actively becoming like them, Bianco said in a segment of the Schwab Network on Monday.

“When you start losing focus and start going towards [fear of missing out] into an orange poker chip like the spot Bitcoin ETF, then I feel like we’ve lost the narrative,” said Bianco, a macro strategist who has worked at Wall Street firms.

The comments from Bianco, who has called the January launch of the 10 spot Bitcoin exchange-traded funds a “giant mistake,” highlight how crypto is meshing into traditional finance.

ETFs have been a key driver behind Bitcoin’s 57% surge in 2024 as institutions including Goldman Sachs, JPMorgan, Standard Chartered, PayPal, and Revolut muscle into the space.

‘I’m very worried’

Bianco criticised ETFs for contributing to higher correlations between traditional assets and cryptocurrencies and for deviating from Bitcoin’s original value proposition.

“They’re literally not hiding the ball,” Bianco said. “They’re saying every boomer is going to call its wealth manager and FOMO into this thing at $90,000 and $100,000 and take it to $150,000.”

“If that’s what you think is going to cause Bitcoin to go to $150,000, I’m very worried.”

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‘Completely destroy Bitcoin’

Bianco is not alone in voicing concerns about spot Bitcoin ETFs.

In December, BitMEX co-founder Arthur Hayes warned that ETFs run by the likes of of BlackRock could “completely destroy Bitcoin.”

The problem, Hayes said, is that financial giants’ ETFs “vacuum up assets, store them in a metaphorical vault, issue a tradable security, and charge a management fee for their ‘hard work.’”

If Bitcoin are stored and not used, that would mean miners that maintain the blockchain won’t be rewarded with transaction fees, which Hayes argued may jeopardise their ability to stay afloat.

Crypto market movers

Bitcoin rose by 0.2% in the past 24 hours and is trading at $66,095.
Ethereum dropped 1.5% to $3,166.

What we’re reading

Hong Kong police freeze assets linked to crypto exchange JPEX amid $403m fraud wave — DL News.
Two SEC Lawyers Exit After Judge Sanctions Agency In DEBT Box Case — Milk Road.
FTX to Auction Next Batch of Locked Solana Tokens: Figure Markets CEO — Unchained.
3 Things To Look Out For This Week — Milk Road.
Hoping for US stablecoin laws in 2024? Good luck with that — DL News.

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.