Are crypto ETFs actually hurting bitcoin and ethereum adoption?

The introduction of bitcoin and ethereum ETFs marks a significant moment in the crypto space, offering traditional investors an easier path into digital assets. But that ease raises questions about true ownership and the spirit of crypto.

Roundtable host Rob Nelson and Chris Sullivan, Co-Founder and Portfolio Manager of Hyperion Decimus, discuss these topics and evaluate the pros and cons of ETFs in the cryptocurrency market.

Nelson began the conversation by acknowledging the accessibility and convenience that ETFs offer investors. “ETFs are a very easy way for someone who owns stocks to acquire bitcoin,” he said. Despite his reservations about the dominance of big players like BlackRock, Nelson agreed that these ETFs play an important role in democratizing access to cryptocurrencies.

Sullivan emphasized the importance of understanding the mechanics behind ETFs. Indexing is a valid long-term strategy, he explained, but not all ETFs effectively represent underlying assets. “I want to invest in indexes, which are essentially representative parts of stocks,” Sullivan explained, emphasizing a preference for transparency and accurate representation in investment products.

One of Sullivan’s main criticisms of ETFs is the lack of self-sovereignty for investors. He noted that owning an ETF is not the same as owning the underlying asset, drawing parallels to the dematerialization of securities from the 1960s to 1990s. “Forget about not getting your own self-sovereignty by owning Bitcoin yourself, but you don’t actually even own shares of the ETF,” he said, emphasizing the fundamental disconnect between investors and their assets.

Nelson acknowledged the learning curve associated with direct crypto investments but questioned its practicality for most people. “Most people don’t buy it because it represents freedom. Most people buy it because they hear it’s a good investment,” he said. This sentiment reflects a broader trend where convenience often outweighs the philosophical and technical understanding of cryptocurrencies.

Despite differing views on the accessibility and educational aspects of crypto investing, both Nelson and Sullivan agreed on the potential of ETFs to increase market liquidity and provide exposure to bitcoin. But Sullivan argued that outright ownership of assets like bitcoin and gold remains the preferred path for those seeking true self-sovereignty and freedom from fiat currencies. “If you want the real deal, you have to get the real deal,” he concluded.