{"id":387317,"date":"2024-01-17T05:30:27","date_gmt":"2024-01-17T05:30:27","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=387317"},"modified":"2026-04-17T11:08:26","modified_gmt":"2026-04-17T10:08:26","slug":"the-etf-showdown-bitcoins-store-of-value-vs-ethereums-technological-utility","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/the-etf-showdown-bitcoins-store-of-value-vs-ethereums-technological-utility\/","title":{"rendered":"The ETF showdown: Bitcoin’s store of value vs Ethereum’s technological utility"},"content":{"rendered":"

Over the last few months, the crypto internet has been dominated by the Bitcoin ETF talk<\/a>. And for a good reason. At a $835.7 billion market cap, the pioneering crypto makes up 49% of the total crypto market, consisting of tens of thousands of tokens.<\/p>\n

In Bitcoin\u2019s 15-year life cycle, an exchange-traded fund (ETF) represents a pivotal divergence, a milestone in legitimacy. Once derided as \u201cfraud\u201d akin to tulip mania, \u201crat poison,\u201d or \u201cindex of money laundering\u201d, Bitcoin\u2019s entry into the ETF arena discards those perception rags and replaces it with a brand new coat.<\/p>\n

Long-Term Trickling from a Deep Pool<\/h2>\n

Having the blessing of the Securities and Exchange Commission (SEC) means that institutions can start apportioning their capital into a high-yielding asset. Bitcoin fits the bill because, even more so than gold, its supply is affixed, and even though Bitcoin is digital, it is grounded in physicality via the proof-of-work mining network.<\/p>\n

As of October 2023, US ETFs have $5.6 trillion worth<\/a> of equities. Even in low single-digit percentages, capital trickling into Bitcoin is poised to create a rising tide, a feedback loop owing to Bitcoin\u2019s limited supply. Without the hassle of custodianship, investors get exposure to this tide, represented as ETF shares that track Bitcoin\u2019s spot price.<\/p>\n

Just one such Bitcoin ETF applicant is BlackRock. The world\u2019s largest asset manager had already lined up capital to the tune of $2 billion, according to sources<\/a>.<\/p>\n

Following the approvals on January 11th, an expected sell-pressure transpired in a classic \u201csell the news event,” bringing the BTC price<\/a> down -7.4% over the week. Yet, launching a new investment vehicle has been successful, tracking over $1.4 billion<\/a> in AuM and $3.6 billion in volume in just two days.<\/p>\n

But what of Bitcoin\u2019s long-following shadow, Ethereum? Having transitioned from proof-of-work to proof-of-stake, the Ethereum project is perceived quite differently from Bitcoin. What are these differences and how would they reflect on their respective ETF investment vehicles?<\/p>\n

The Store of Value: Bitcoin in the Spot ETF Market<\/h2>\n

For many years, it was not clear what Bitcoin would become. After all, Bitcoin underwent over 100 hard forks, splintering the original whitepaper<\/a> vision of a \u201cpurely peer-to-peer version of electronic cash\u201d.<\/p>\n

Following the resolution of Bitcoin\u2019s contentious block size wars in 2017, the Small Blockers faction won. Instead of increasing block size outright, they opted for soft Bitcoin scaling via the SegWit upgrade. This veered Bitcoin\u2019s fate into a store-of-value asset instead of a low-friction P2P digital cash.<\/p>\n

Hard limitations make it impossible to have it both ways. If the large block size faction had won, more computing power and bandwidth would have been required to run full mining nodes, leading to network centralization and potential transaction censorship.<\/p>\n

On the other hand, smaller blocks retain decentralization but make it difficult to scale on-chain. As fewer transactions fit inside a block<\/a>, higher network activity leads to higher transfer fees because waiting lines are formed. And if BTC transfer fees go up, Bitcoin\u2019s daily currency proposition is diminished.<\/p>\n

At least, without using layer 2 scaling solutions like the Lightning Network<\/a>, harnessed by payment apps like Strike. Such payment systems can utilize Bitcoin as a vehicle to transfer cash and interface with the existing banking system.<\/p>\n

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I use send globally via strike app to bank all the time. It is near instant cash deposit settlement. Our family in the Philippines are in awe of the power of#Bitcoin<\/a><\/p>\n

— General Plebian (@GenPlebian) December 23, 2023<\/a><\/p><\/blockquote>\n