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Bitcoin ETF carries additional risks for investors

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Crypto News

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The imminent launch of the bitcoin ETF has inspired the crypto community. The executive director of DeFi Unchained Capital, Parker Luce, does not share this joy and believes that an exchange-traded fund (ETF) on BTC will be unprofitable for investors.

During his podcast “Bitcoin supply chain&debit celing”, a former Deutsche Bank economist stated that when buying ETF shares, investors assume the risks of a market maker. The market maker puts them in the price at which he offers an ETF on the stock market.

“The exchange-traded fund effectively processes bitcoin as if it were a traditional financial asset. If an investor buys it through an ETF, then you assume additional risks of the market maker. As a result, he chooses one of the riskier ways of owning bitcoin than if he purchased it on the exchange.”

Parker Luce also believes that the Securities and Exchange Commission (SEC) chose the least of the evils for itself when it allowed the launch of an investment exchange-traded fund for futures based on bitokine, than if it had allowed a direct ETF for bitcoin.

“A futures-based bitcoin exchange-traded fund may be an effective SEC excuse to avoid launching an ETF for real bitcoin.”

The expert is generally not happy with the launch of an ETF for bitcoin futures and noted that this may provoke a slight increase in the price of the cryptocurrency. The reason may be a temporary increase in the interest of private and institutional investors in bitcoin.  However, this does not change the bitcoin acceptance curve and does not fundamentally affect the cryptocurrency market.

Pantera Capital CEO Dan Morehead does not consider ETFs to be an additional risk, but worries that launching an ETF for bitcoin will bring down the price, as it was in 2017 with BTC futures. Before the SEC approved the launch of a bitcoin ETF based on ProShares futures, the SEC chairman confirmed that he was not against the launch of a narrow class of exchange-traded funds (ETFs) for bitcoin, which would invest in futures contracts, and not in cryptocurrency directly.

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