Bitcoin ETFs open floodgates for manipulation

16 August, 2018

Andreas Antonopoulos, a Bitcoin advocate with a large following, uploaded a video on Tuesday that outlined why an ETF on the cryptocurrency creates so much hype and, more importantly, why he doesn’t like the idea.

“I’m going to burst your bubble. I know a lot of people really want to see an ETF happen because ‘too the moon’ and ‘lambos’ and all that. I think it’s a terrible idea. I still think it’s going to happen… I’m actually against ETFs,” he said.

Antonopoulos was clear that he understood why many people are excited about the prospect, explaining that other commodities for which ETFs appeared suddenly found their prices skyrocketing.

However, he is concerned about the possible market manipulation that could happen as a result of this.

“Everybody’s so excited about ETFs because what we’ve seen in other markets is that when an ETF becomes available—as we saw in gold—the price really increases dramatically as suddenly that commodity becomes available to a lot more investors and these investors pile on. But the other side of it is that there’s always these claims that the commodities markets are heavily manipulated and opening up these exchange-traded instruments only increases the ability of institutional investors to manipulate—especially [in the case of] large market makers—the prices of commodities, not just in the markets where it’s traded as an ETF but more broadly,” he clarified.

Antonopoulos went on to explain that large market makers could manipulate the price of gold around the world, not just inside the vacuum of an ETF, since “it’s a worldwide liquid market.” This is exactly the concern that the SEC had when it rejected the Winklevoss twins’ application for their own Bitcoin fund a few weeks ago.

Besides the concerns for market manipulation and insider trading that Antonopoulos has, there are other aspects that make ETFs a Pandora’s box in his opinion. Perhaps the most important argument he makes in his video is the loss of rights and responsibilities of investors in these funds.

He argues that investors do not have the same rights to vote with their wallets on forks that address important issues in the Bitcoin ecosystem, speculating that this makes it all too easy for ETFs to make their own forks and have enough weight to swing around to turn people towards those new coins that would probably be less privacy-oriented.

“I can, for example, use my Bitcoin to vote. I can choose which exchanges to send my Bitcoin to, if I want to send it to an exchange. I can choose to pick up, for example, fork coins in another fork because I have the keys. If there is ever a fork debate—which is very likely to happen again in any cryptocurrency—then the funds that control Bitcoin now have a very large voice. Their shareholders don’t. They don’t get to choose which fork the fund is going to follow in a Bitcoin debate… We actually saw that level of influence during the August 1st fork… Large custodial exchanges had a very strong voice in the ecosystem. They were able to decide if they were going to support or not going to support [a fork] on behalf of 10 million customers,” he said.

Perhaps one more thing that should be added to Antonopoulos’ arguments is that if Bitcoin becomes more centralized, it might expedite the ability for governments to control the coin vigorously through privacy-quenching measures.

Right now, in some ways, it’s all a matter of interest. Are exchanges that wish to offer ETFs interested in—or incentivized to—moving in a direction in which they use their influence over the cryptocurrencies they dabble in to strip them of what made them attractive to early adopters in the first place?

Probably the single most compelling piece of relieving news is that regardless of the answer to this question, there will always be that pesky altcoin that obfuscates its blockchain to the point that it is almost unreadable to anyone trying to lift the veil of its privacy.

Source link   Crypto currency: Bitcoin

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