The first United States BTC ETF went live in October 2021. The ProShares Bitcoin Strategy ETF (BITO) tracked BTC futures, allowing Wall Street and institutional investors to trade the volatile price movements without direct exposure.
On January 11, 2024, the first BTC spot ETFs went live, put together by financial giants BlackRock (NASDAQ: BLK) and Fidelity. Within a year, BlackRock’s offering had amassed over $50 billion in assets, making it the most successful ETF debut in history. FBTC, Fidelity’s version, saw $6.9 billion invested in 2024, making it a resounding success, too.
These spot ETFs have undoubtedly driven the price of BTC higher and added to the asset’s actual liquidity, but it’s unclear whether they have staying power. Whatever happens in the future, they can at least be taken seriously, given how the traditional finance industry has embraced BTC wholesale. However, this week, filings with the Securities and Exchange Commission (SEC) suggest a crypto ETF tsunami is coming, and these will be objectively bad for everyone involved.
The SEC and investors should proceed with caution
Given the change in tone toward digital currencies since Donald Trump became the 47th U.S. President, it’s understandable that industry insiders are excited.
However, SEC filings show half a dozen filings on February 19 and 20 alone, and that’s just a tiny snapshot of the overall filings. In addition to proposed rule changes, ETFs for XRP, Solana, Litecoin, and a slew of other altcoins are coming. Bloomberg Intelligence has given the Litecoin ETF approval odds of 90%, with Solana at 70% and XRP at 65%.
In short, a tidal wave is coming, with the president launching memecoins and a crypto-friendly lawyer, Paul Atkins, tapped to head the SEC; they’ll likely be approved in short order.
Before rushing in, investors should ask themselves one simple question: what value does the underlying asset produce, or what is it useful for? While some try to liken digital currencies to gold or other rare metals, they have a fundamental use case in industry and the physical world. With BTC, and especially with the altcoins to come, it’s difficult to pinpoint any real value.
The SEC should also be careful: the Trump train will pass, and someday, it will be far in the rearview mirror. After it’s gone, the agency will still have to function, and its credibility is the only thing that will allow it to do so effectively. Allowing BTC into the traditional financial sector is risky enough; allowing altcoins is flirting with reputational obliteration.
Warren Buffet’s example of BTC versus farmland
At the 2022 Berkshire Hathaway annual meeting, the Oracle of Omaha, Warren Buffet, compared BTC to farmland:
If you offered me all of the [BTC] in the world for $25, I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another. It doesn’t produce anything. Now, if you offered me a 1% interest in all the farmland in the United States, I’d write you a check immediately because farmland produces food; it has real economic value. – A paraphrase of Warren Buffet’s point made in the video link below.
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Buffet, being one of the most astute investors of all time, is correct. BTC provides no value: in fact, there’s a good argument that it destroys value because of the electricity and brainpower it uses, which could be used for more productive endeavors.
Yet, free market fundamentals determine that if there’s demand for it, there should be a supply to meet it. At least with BTC, there’s probably 10s of billions in real liquidity (minus the Tether), and it’s unlikely to go to zero overnight. Over the last decade and a half, it has risen and crashed numerous times, recovering each time to defy the skeptics.
With the proposed altcoin ETFs, it’s a different story; these are mainly pure junk. Small blocker Charlie Lee created LTC to solve a problem caused by those same small blocks he supported. Solana has failed every time it has been put under moderate pressure. XRP is a literal meme within the industry; Ripple insiders control most of the supply and are only too happy to dump it on retail buyers.
When they come, these new ETFs will be jammed with worthless junk that isn’t even used within the industry, let alone the wider world. The verdict is out on BTC in the long term, but rational, intelligent investors should avoid the rest of them. If the SEC cares about its long-term credibility, it should oppose the approval of altcoins ETFs; people’s retirement savings are worthy of more than XRP, Solana, and Litecoin!
Watch: Realizing the vision for Bitcoin beyond crypto
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