The launch of 11 SEC-approved spot Bitcoin ETFs in the U.S. on January 11 marked a transformative moment in investing. As Cointelegraph reported earlier today, these new financial instruments leverage the core characteristics of the Bitcoin network and its associated blockchain ledger to establish an unmatched level of transparency. But how exactly do they differ from traditional ETFs?
According to Darin Feinstein, a seasoned blockchain entrepreneur quoted in the Cointelegraph article, a critical factor is the ability to verify their holdings directly. Because spot Bitcoin ETFs hold actual Bitcoin (BTC), anyone can audit and prove their reserves at any moment, thanks to the public nature of the Bitcoin blockchain. Feinstein goes on to assert the Bitcoin blockchain is “the best accounting system that’s ever been available to humanity.”
Compare this with standard gold-backed ETFs. Though they too are tied to a physical asset, investors lack real-time visibility into whether those gold reserves are present, verified, and properly managed. There’s inherent trust within the system in this scenario, a reliance on human management rather than cryptographic proof.
It’s not just about holdings with spot Bitcoin ETFs. The public Bitcoin network makes tracking transactions effortless. Blockchain analytics platforms, as the Cointelegraph article mentions, can independently locate ETF addresses and monitor for activity that could raise concerns for some investors. Additionally, Bitcoin has a hard supply cap of 21 million. We know exactly how many exist and how many haven’t been mined yet. Again, contrast this with gold, where estimates about existing reserves fluctuate over time.
“Investments that self-audit, self-authenticate, prove reserves and are publicly viewable 24 hours a day have never existed until the Bitcoin ETF,” says Feinstein, who is the founder of Core Scientific (NASDAQ: CORZ), which is “building one of the largest bitcoin mining operations in North America.” He believes spot ETFs introduce safeguards unlike those in traditional markets, where record-keeping can be susceptible to corruption and error.
There are ongoing discussions about the implications of spot Bitcoin ETFs within the cryptocurrency community. One key concern covered by Cointelegraph relates to the possibility of generating “unbacked Bitcoin,” potentially weakening the underlying asset’s price or stability. However, people like Bloomberg ETF analyst Eric Balchunas remain optimistic that issuers will act in their best interests, and these voices maintain that spot Bitcoin ETFs are very similar to existing physically-backed gold ETFs.
CNBC reported on January 23rd, 2024, that Core Scientific successfully completed its reorganization, which began in 2022. After relisting on the Nasdaq, share trading resumed on January 24th, 2024. The restructuring significantly reduced the company’s debt by $400 million.
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