Can Ethereum ETF Benefit Bitcoin?

The recent approval of the Ethereum ETF by the Securities and Exchange Commission (SEC) has sent shockwaves through the crypto community. Many, including myself, had anticipated the SEC to reject the application, making the approval a surprising turn of events.

The key question at the heart of this approval is whether Bitcoin and Ethereum are substitutes or complements in the cryptocurrency market. While some argue that investments in Ethereum can attract new funds into Bitcoin, diverting them from traditional assets like stocks and bonds, I believe they function more as substitutes. With a finite amount of attention dedicated to cryptocurrencies, any shift towards Ethereum could potentially detract from investments in Bitcoin.

The approval of the Ethereum ETF has been viewed by some as conferring an unwarranted sense of legitimacy upon Ethereum. This sentiment arises due to concerns surrounding Ethereum’s centralization, governance issues within the Ethereum Foundation, past protocol governance failures, and the significant influence wielded by its founder. While Ethereum is a platform for technological experimentation, this alone does not necessarily position it as a viable investment asset.

The episode surrounding the Ethereum ETF approval sheds light on the limitations of gatekeeping entities such as securities regulators, central banks, and investment bankers. These gatekeepers are subject to constraints like bounded rationality, political influences, and tendencies towards private rent-extraction. The remedy, as highlighted by this event, lies in fostering free and open competition within the market, allowing market forces to determine outcomes.

While the approval of the Bitcoin ETF earlier in the year was met with jubilation by many in the community, it is crucial to recognize the potential pitfalls of celebrating government gatekeepers’ decisions that happen to align with personal interests. Relying on such gatekeepers’ decisions can be precarious, as evidenced by the recent approval of the Ethereum ETF.

In conclusion, the approval of the Ethereum ETF marks a significant development in the cryptocurrency landscape, raising pertinent questions about the nature of investments in Bitcoin and Ethereum. The implications of this decision reverberate across the crypto sphere, underscoring the need for a nuanced understanding of the dynamics at play within the digital asset market.