Technology

The rise of ETFs challenges Bitcoin’s self-custody roots

Posted on by Minakshi

Bitcoin’s Self-Custody Under Pressure: The Rise of ETFs and Institutional Investment

The landscape of Bitcoin ownership is evolving, particularly with the surging popularity of Bitcoin Exchange Traded Funds (ETFs) and other institutional investment vehicles. This shift is prompting discussions about whether the core principle of “not your keys, not your coins,” central to Bitcoin’s ethos, is being challenged.

A Decline in Self-Custody Since the ETF Launch

On-chain data indicates a gradual decrease in Bitcoin self-custody since January 2024, coinciding with the approval and launch of Bitcoin spot ETFs in the United States. This trend raises important questions about the decentralised nature of Bitcoin, originally envisioned by Satoshi Nakamoto.

Slowing Growth of New Bitcoin Addresses

After almost 15 years of consistent growth, the rate at which new Bitcoin addresses are being created has slowed. Furthermore, active Bitcoin addresses have significantly fallen from approximately 1 million in January 2024 to around 650,000 in late June. This level is comparable to figures last witnessed in 2019.

Expert Opinions and Market Trends

Analysts are closely monitoring these trends. The availability of spot ETFs appears to have influenced the growth rate of individuals choosing to self-custody their Bitcoin holdings.

Summary:

  • Bitcoin ETFs are gaining traction, potentially impacting Bitcoin’s self-custody principle.
  • On-chain data reveals a decline in self-custody since the launch of spot ETFs in January 2024.
  • The creation of new Bitcoin addresses has slowed, and active addresses have decreased significantly.
Key Takeaways:

  • The growing popularity of Bitcoin ETFs offers investors a regulated and accessible entry point into the Bitcoin market, but it comes at the cost of relinquishing direct control over their assets.
  • The decline in self-custody raises questions about the balance between institutional investment and the original decentralised vision of Bitcoin.
  • Indian investors should carefully consider the trade-offs between convenience and control when choosing how to hold their Bitcoin.
  • Understanding on-chain data and market trends is crucial for making informed decisions in the evolving cryptocurrency landscape.