After The ETF: Bitcoin’s Coming Power Struggle

Last week’s spot ETF approvals means giant institutions like BlackRock and Goldman Sachs are entering the bitcoin market.

Wall Street could privilege Bitcoin that’s mined with green energy or that provably untouched by nefarious activity.

That could set off a struggle for Bitcoin’s future akin to the acrimonious “Blocksize Wars” starting in 2017.

A sizable crypto community’s presence at the World Economic Forum in Switzerland this week highlights an inherent tension: on the one hand, the industry’s desire for acceptance by the business establishment and, on the other, a concern that engaging with it could undermine crypto’s disruptive, rebellious ethos.

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With 2024 shaping up to be the year that traditional finance (TradFi) arrives, that tension seems especially acute. After all, the U.S. Securities and Exchange Commission’s long-awaited approval ofbitcoin exchangetraded funds (ETFs) sets the stage for giant asset managers such as BlackRock and Fidelity, and for massive banks like Goldman Sachs and JPMorgan, to participate in the bitcoin market.

The question is: will these institutions’ participation affect the power dynamics within Bitcoin itself. Will “Bitcoin maxis” and “degens,” who place a high value on censorship resistance and decentralization, see their influence over Bitcoin diminish as these large regulated entities start to engage?

Might BlackRock, Goldman or JPMorgan, for example, insist only on buying coins mined with renewable energy, or that are “clean” of any past connection to non-identified actors? Would their demand for bitcoin be so substantial that such policies would materially change the behavior of others, such as miners, so as to change the very makeup of Bitcoin itself?

It’s too early to say. While that might be a frustrating answer, the lack of predictability around that question stems from the complex power dynamics within Bitcoin’s very decentralized, diverse ecosystem. That complexity is part of Bitcoin’s appeal and, in the long run, leads me to believe these Wall Street titans will be unable to alter it significantly.