The Coming Crypto Renter Class
As Spot Crypto ETFs Get Approved, Investors Face A Critical Choice
IN TODAY’S REPORT
What we cover: NONCE SENSE Edition. Crypto owners vs renters. The coming renter class.
TODAY’S NONCE SENSE
To Rent Or To Own
Membership in a societal class is rarely chosen but rather imposed by myriad external factors. While some manage to escape the bounds of their socioeconomic class in time, others descend to a lower strata. Either way, it’s exceedingly rare that one actually gets to choose which class to belong to right from the start.
But investors are about to choose.
Regardless of timing, a spot Bitcoin ETF will get approved in the coming months. Spot Ethereum ETFs will come next, followed by a torrent of altcoin basket ETFs in the coming years. TradFi’s omnivorous appetite for fees will drive this expanding universe of products as much as investor demand.
But while the suite of new products will offer investors a wide range of choices over time, most will fail to see the the real choice: to Rent or to Own.
New onramps, access, and products will mean that future buyers of spot crypto ETFs will likely benefit from exposure to some of the most innovative financial assets ever created. But the key word here is exposure. Future spot ETF buyers does not equal future crypto owners. More succinctly, spot crypto ETF owners ≠ spot crypto owners. The distinction cannot be overstated. Let’s break it down.
What will these buyers of spot crypto ETFs actually be buying? Exposure. More specifically, exposure to the financial return of Bitcoin (minus fees) or whatever other crypto asset their ETF represents. Is this a problem? It depends.
Most noob investors will be glad to finally have a “safe” (i.e., regulated) way to own crypto. No sketchy offshore exchange needed, no crypto wallet needed, no cold storage device needed, and no domain expertise needed. Just use your RIA, licensed broker, or self-directed online brokerage to buy the spot Bitcoin ETF and you own Bitcoin! But alas, it is not so.
Spot crypto ETF “ownership” provides exposure to the financial return of the underlying spot asset, but that’s it. Do these buyers really own spot Bitcoin? No. They do not possess the private keys, which is the only true measure of ownership. Rather than being bankless and independent, they will instead rely on intermediaries to hold their spot crypto asset(s) on their behalf. Additionally, these ETFs will be subject to capital controls and could someday go away (be delisted) for any number of reasons. Spot crypto ETF “ownership” is effectively just renting the underlying asset.
The coming crypto renter class will probably not care about these distinctions. At least not at first. Many moons down the road, however, in a distant year, in a surprising administration, in a new financial crisis, and/or in the midst of an unexpected war, many of these renters will wake up and wonder what the hell happened to “their” Bitcoin or Ether.
But it wasn’t ever theirs to begin with. They were just renters all along.
peace_love_crypto-DB
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