At a time when one bitcoin cost $100 and its entire market cap stood at just $1 billion, the filing for an exchange traded fund by the Winklevoss twins caught the attention of even New York Times in 2013.
“The proposal from the twins, who already have sizable bitcoin holdings, is an audacious one,” they said. “The Winklevoss Bitcoin Trust could send digital money from the realm of computer programmers, Internet entrepreneurs and a small circle of professional investors like themselves into the hands of retail investors — virtually anyone with a brokerage account.”
Those retail investors already had access. Crypto exchanges were proliferating at the time. Mining bitcoin at home was still somewhat easy. Peer to peer exchanges provided access to all.
Stock investors however were shut out. They saw bitcoin go to $1,000 just months after this filing, then $10,000 four years later, and near $100,000 in 2021.
Through all that time, countless of applications for a bitcoin spot ETF were denied and denied and denied.
For perspective, a $1,000 investment at the time of this ETF filing would be worth $1 million in November 2021.
Naturally very few would have held throughout, but if there’s anything that this generation takes from this episode is that permission slip requirements can be harmful.
SEC did in the end approve a paper bitcoin ETF in October 2021. That’s very much at the peak of that cycle and once is a coincidence, but the CME bitcoin futures were also approved at the very top in December 2017.
This seemingly uncanny ability to time the top is a curiosity and therefore leads us to suggest a bitcoin spot ETF may be approved right at the top of the next cycle, maybe sometime in November 2025.
Now some may suggest this top timing ability is more paper dilution, but the paper ETF barely attracted $1 billion, though arguably it has caused some problems for the Grayscale Bitcoin Trust (GBTC).
GBTC has also been trading for a decade, though through a loophole that sort of limits it to rich investors.
There has been no problem throughout that period where the security of the assets is concerned, but despite this decade long experience and proof, SEC not only has denied GBTC’s conversion into an ETF, it is fighting the matter in court.
A cynic view may be that SEC actually wants to keep retail out until all the extraordinary gains are saturated.
Who wants competition afterall and the SEC chair, Gary Gensler, is very rich, worth about $100 million.
Knowingly or unknowingly, on a self-interest basis for him and his class, keeping access limited so that they can scoop all the coins first makes sense.
The nature of bitcoin makes that a lot more difficult than with traditional investments, like startups, which too are restricted to the public.
They too have extraordinary gains, it’s just the public can’t have them and usually does not see them as they are limited to rich investors.
A purchase of Google shares back in 2013 would have probably made you a millionaire too. So while the bitcoin gains might seem extraordinary, they’re fairly ordinary. It’s just that the bitcoin ‘shares’ were available to the public even at the very early startup days, unlike company shares.
But those bitcoin ‘shares’ were not available to the stock market. Why? Well the bureaucracy claims to be very risk averse, which itself can be a problem, but it may well be more the case that they’re actually just captured with both SEC chairs since they were relevant to this space being from Goldman Sachs.
Bitcoin is a hyped up fraud, the CEO of JP Morgan Jamie Dimon said while speaking to the public on CNBC. That same JP Morgan however offers access to bitcoin, but only for rich investors.
This class based discrimination is astonishing in just how prevalent and pervasive it is, yet it hides in plain sight even though we can plainly see it.
We’re completely ignoring it however in our crypto space, with Ethereum and others like Uniswap also starting off as available to the public from the first day.
SEC is trying hard to change that, fighting Ripple in court. They claim you need disclosure, but what they really want is to grant permission slips.
And when it comes to a bitcoin spot ETF, that permission has still not been granted after a decade. Traditional crypto companies that want to go public have also been bogged down.
Imagine then if ethereum first needed Gensler to grant permission for it to launch. It would not exist.
And yet that’s exactly what SEC insists on, that they have to grant such permission, even though for an entire decade they have not actually granted the permission.
They have in Canada and Europe, and for three years now such bitcoin spot ETFs have traded without any problems on their stock markets.
What’s so special about US, and what superior way do these US bureaucrats have over European or Canadian ones, that they deny?
Well, banks are not so dominant in Europe or Canada over the political system. But bankers hating crypto sounds a bit like a gone time with perception in finance and Wall Street completely transformed recently, even though there still are the Dimon sorts.
Giving the futures ETF may illustrate as much, and a spot ETF is not that far away now that it does not even matter since Americans can buy the European ones.
But holding it out for a decade and continuing, when the entire ETF scene is celebrating its 30th anniversary, is a curious episode in the introduction to bureaucracy 101 as it illustrates it can cause real harm.
To the traditional investors though, not to the asset itself. Bitcoin thrived without SEC, but SEC left behind a whole generation that was used to investing through stock brokers.
And importantly this is not a one off story, it’s what happens everyday. The public, including stock investors, are prohibited from buying any company at the bitcoin’s equivalent price of $100 as they don’t usually IPO, and can only buy it once it’s maybe $200,000 when they finally do IPO.
That $100 turned to a $200,000 gain is for the rich only. If the public wants similar gains as well, they have to gamble through options or leverage where the rich can liquidate them.
Nice system, but a changing one. Code can do away with trusted intermediaries and it is that trust which requires all these regulations and permissions.
If there is no relationship based on trust, a trust that can be abused, then there’s little, if indeed anything, to regulate.
Crypto therefore is bringing the financial tools that the rich had for long to the masses, and it does not need the bitcoin spot ETF for it because you don’t need NYSE to buy bitcoin, while you do need it to buy Coinbase or other public companies as they only trade on NYSE.
SEC therefore, by deluding itself for a decade to think it has any power, has only revealed its true face, its abuse of power and in the process has made a whole generation now be very skeptical of the bureaucracy as a whole, something that may have political ramifications in as far as deregulation may soon be back on the agenda.