Will ETFs Be the Death Blow for Bitcoin?

Bitcoin needs to be used to survive. Unlike fiat money, Bitcoin only exists when people transfer it back and forth.

Imagine the Bitcoin system as a game where everyone needs to keep passing a ball around for it to stay in play. If everyone stopped passing, the game would end.

If that happened, the people keeping the Bitcoin network running (called “miners”) wouldn’t earn any new bitcoin (“block reward”). And without rewards, they wouldn’t be able to afford to keep their mining facilities operational.

They’d have no choice but to turn off their machines and quit, and then the whole Bitcoin system would fall apart.

Now, imagine bitcoin ETFs from huge TradeFi companies, like BlackRock, Fidelity, Invesco, etc., gaining mainstream acceptance and resulting in massive capital inflows.

These institutions would end up buying up all the bitcoin in circulation and just holding it! They wouldn’t be using the Bitcoin network, so the ball wouldn’t be moving.

In this extreme scenario, miners wouldn’t earn any block rewards to keep the network running, and bitcoin would become useless.

The irony is that this “digital gold” would die due to lack of transactional activity. .

In a nutshell:

  • Bitcoin thrives on transactions, not just ownership.
  • Without transactions, miners can’t afford to maintain the network.
  • No miners, no network, no bitcoin.
  • Huge TradFi companies hoarding bitcoin due to institutional demand of their ETFs could threaten its existence.

Any thoughts on this?