(Kitco News) - As Bitcoin gets embraced by a wider audience via the new spot Bitcoin ETFs, is the asset still at risk of getting banned in the U.S.? Author of ‘The Bullish Case for Bitcoin,’ Vijay Boyapati, warns that Bitcoin might not be out of the woods yet.
Markets cheered the momentous achievement in the Bitcoin space as the U.S. Securities and Exchange Commission approved 11 spot Bitcoin ETFs, including from BlackRock, VanEck, ARK, and Invesco.
The green light for spot ETFs will shift Bitcoin from being an asset owned essentially by retail investors to a global macro asset owned by hedge funds, institutions, and even nation states, Boyapati told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.
The debut of the ETFs saw a staggering trade volume of $4.6 billion recorded during the first day of trading on Thursday, according to the London Stock Exchange Group (LSEG).
However, despite the mainstream embracing the asset via ETFs, Bitcoin could still be in danger of getting banned in the future.
“[ETF approvals] minimizes that risk. But it's not eliminated. I've always thought that this question of whether Bitcoin has enough political capture that it becomes impossible to ban outright, seize it, or try and disrupt it in any way," Boyapati said. "That question is going to be decided in the next two to three years."
The key here is whether government institutions perceive Bitcoin as a threat to their monetary policy that is based on money printing, Boyapati explained.
“The Federal Reserve sees Bitcoin as an existential threat to monetary policy. If the world's savings flee into Bitcoin, you can't control monetary policy anymore. This is an asset that, by design, cannot be inflated, and the Federal Reserve's control over monetary policy comes directly from its ability to inflate and control the money supply,” he said.
If everyone’s savings are in Bitcoin, the Fed has no power. “And I think the Fed has an inkling that this is possible. They've just dismissed it. But this ETF is a watershed moment where Bitcoin will become available easily to the masses. Does that scare them? I think it will. Do they act on it? That's an open question,” Boyapati described.
Based on this, a Bitcoin ban in the future is still possible, according to Boyapati. “That risk still exists. It has dropped significantly [this week], but I would not say that the risk has been eliminated. I know there are a lot of people who think Bitcoin is inevitable. But am I still quite concerned about this risk.”
Boyapti also notes that Bitcoin is easier to seize under the custody arrangement of an ETF because a lot of the providers use the same custodian – Coinbase. “As the flow of funds into ETFs grows dramatically, you're going to have a lot of Bitcoin custodied at one company, which is Coinbase. That certainly increases the risk that governments can much more easily confiscate Bitcoin,” he said.
Boyapati draws parallels to when gold was confiscated in 1933, adding that Bitcoin could be setting itself up for a similar risk. “One of the problems with gold is that it's physically difficult to own it yourself – you have to physically custody it and secure it yourself. And if you have a lot of it, that leads to centralized custody. This is why gold was held at major banks in the U.S., which made it very easy for the U.S. government to confiscate gold in 1933. And it does look like that something similar is happening with Bitcoin.”
Boyapati projects that Bitcoin will reach the same market capitalization as gold in the next five years. Watch the video above to get insights on what that would mean for Bitcoin price.
Green light for spot Bitcoin ETFs, what’s next?
With the spot Bitcoin ETFs active, analysts forecast a flood of demand coming into the space. Analysts at Bernstein projected $10 billion of inflows in 2024, while Standard Chartered expects $50 billion to $100 billion this year alone.
According to the latest provisional data cited by CCData, Bitwise saw the largest inflows among the spot Bitcoin ETFs — around $230 million. This was followed by Fidelity, with an inflow of $227 million, and then BlackRock, with an inflow of $111 million.
On the tamed Bitcoin price reaction to the approval of spot ETFs, Boyapati noted that the news was already priced in. He added that investors should pay attention to what comes next as the demand that follows in the next few months is yet to be priced in.
“First, we're going to see a number of other financial products start including Bitcoin in their asset base. And then I think we're going to see institutions. The SEC approving Bitcoin is basically saying we think this is okay for the public to own. That's going to cause a lot of companies and financial institutions to take a second look at this,” he said.
Boyapati forecasts $100 billion of inflows into Bitcoin ETFs over the next two to three years. “Over a longer time horizon, it's going to approach a trillion dollars because I do believe that Bitcoin has become a global macro asset,” he added.
According to Boyapati’s forecast, nation-states will start to diversify into Bitcoin and use it as the new reserve asset. Watch the video above to get key catalysts and timelines.
The most important question of the 21st century
As Bitcoin increases its reach globally, one giant question still lingers within the Bitcoin community and beyond — who is Satoshi Nakamoto?
“This will be seen as the greatest mystery of the 21st century. I believe Bitcoin will become the world's reserve currency. For something to become that significant in the world economy and for people not to know how it came about is an incredible mystery,” Boyapati stated.
However, this is not a problem for Bitcoin because it is a decentralized asset, he added.
“If Satoshi were to come back and say, well, ‘I don't like this idea of a fixed supply anymore,’ he really would have no power to change anything because the process of developing and updating Bitcoin is completely decentralized, and no single person can change it,” Boyapati noted.
One possible problem is if Satoshi decides to sell his Bitcoin. “Satoshi supposedly controls a million Bitcoin. One worry would be if he comes back, dumps all those Bitcoin on the market, and crashes the price.”
However, in this scenario, Boyapati sees the market as liquid enough to absorb the shock. “It’s one of the most liquid markets on Earth. It trades 24/7 all around the world. It would certainly reduce the price of Bitcoin, but I think the Bitcoin market could recover very quickly,” he said.
This interview is brought to you by Swan Bitcoin. Swan Private - Go beyond legacy finance.
