Title: Expanding Accessibility: The Role of ETFs in the Cryptocurrency Industry
The Chief Technology Officer of Binance, Rohit Wad, believes that the success of the “digital gold” ETF serves as a reminder to continuously improve the accessibility of Bitcoin and Web3 technology, while reducing entry barriers.
The recent approval of a Bitcoin spot ETF in the United States is undoubtedly a significant development for Bitcoin and the cryptocurrency market, particularly in terms of regulation and institutional involvement. From a technological perspective, the positive adoption of ETFs also reminds us that if we want to witness widespread adoption, the cryptocurrency industry must continue to minimize friction in user experience.
Approximately two months after the approval of the Bitcoin spot ETF by the U.S. Securities and Exchange Commission (SEC), Bitcoin hit a new all-time high and regained a market value of over a trillion dollars. An early prediction report estimates that these funds will manage $72 billion in assets within five years, with over $9 billion already flowing into ETFs since their launch.
Although the market seems to be entering a bull market cycle fueled by the ETF frenzy, native cryptocurrencies and Web3 enterprises should not rest on their laurels but rather continue to lower the technological entry barriers.
This is because many institutional and retail investors are turning to ETFs due to the friction in user experience. This friction refers to the numerous steps users must take to use wallets or exchanges, as they have to invest a significant amount of time to learn best practices, such as protecting their passwords and devices, and guard against scams and hacking attacks. All these issues can be addressed through product design.
Let’s compare Bitcoin to gold and understand why both of these commodities are suitable for the ETF market. Regular investors do not want to physically hold gold bars as a means of storing value because they may not know where and how to safely and conveniently store them. This is where gold ETFs come into play.
On the other hand, Bitcoin has long been referred to as “digital gold” due to its scarcity, without the transportation and storage costs associated with traditional assets. So why should we go through the trouble of purchasing ETFs (which are essentially packaged products) instead of owning our digital gold in our own digital wallets?
The reason is that cryptocurrencies are still in the early stages of development, and products such as wallets and exchanges are still too complex and intimidating for the majority of people. Bitcoin ETFs help reduce the entry barriers by managing the complex issues that most people do not want to deal with, such as ensuring the security of mnemonic phrases. In return, investors are willing to bear the costs associated with ETFs and have their assets held in custody.
Considering the fees paid to ETF issuers, as well as forex, premiums, and other costs, ETFs are generally more expensive than buying Bitcoin directly from exchanges. However, there is still a clear demand for ETFs in the market. Traditional financial service providers are legalizing cryptocurrencies in the financial market by issuing extremely straightforward ETFs.
The launch of Bitcoin spot ETFs is a tremendous positive development for the industry as it brings in new users and capital. Traditional asset management companies now have a benchmark to measure performance, which is a very promising step towards expanding infrastructure development to support greater involvement from traditional finance.
If we can eliminate the friction users encounter when dealing with cryptocurrencies, we will undoubtedly increase adoption rates and enable more people to participate. Our shared long-term goal should be to make cryptocurrencies more widely accessible by empowering users with the knowledge and tools to directly engage with and manage their own digital assets. We must create user-friendly, secure, and intuitive products that make cryptocurrencies easily usable by everyone.
Note: This opinion article presents diverse viewpoints and does not represent the position of “WEB3+.”
