Bitcoin ETF. The dream is over. Now, the real fun begins.

After 10 years of resistance, on January 10, 2024, the US Security and Exchange Commission (SEC) approved the Spot Bitcoin Exchange Traded products, or as everyone else is calling it, the bitcoin ETFs.

Since its inception in 2008, Bitcoin was envisioned as a Peer-to-Peer Electronic Cash System and in 2009, the first bitcoin was mined. Bitcoin was promoted as currency without government oversight and to remove the central banks’ monopoly on the production, distribution and management.

To the promoters of bitcoin as a currency, it didn't help that the early adoption of bitcoin was for illicit activities. The infamous Silk Road website, where people could buy drugs and weapons, got its founder into jail. He got two life sentences. To store a bitcoin, one needs a digital wallet, and while the owner may remain anonymous. the transactions themselves are recorded, can't be altered and are visible to anyone. Because of that, we know that the FBI is one of the biggest holders of bitcoin.

But in the meantime, the Bitcoin network was growing and what originated as a hobby or anti-government movement started attracting people and companies that wanted to make money. The Bitcoin network can't operate without computers, which are mining the bitcoin and adding transactions to the blockchain. In the early days, individuals could run the mining process on their own computers. As the price for bitcoin grew, a hobby changed into big business, and millions of dollars were spent to buy specialized hardware.

Having lots of bitcoin and not being able to buy anything (legal and legally) created a demand for exchanges, where people could trade bitcoin (and other cryptocurrencies) for fiat money. That too, attracted questionable transactions where the origin and owner of the bitcoin were not known. I wrote a piece about how people tried to mask the origin of their bitcoin, which led to a Denial of Service attack on one of my websites. Somebody was not happy about it. 8-)

It also brought further scrutiny by governments and various regulatory bodies. Governments start paying attention to bitcoin and the many actors in the ecosystem. Some governments banned bitcoin, some are tolerating it and El Salvador even recognized it as legal tender.

The more the proponents of bitcoin pushed for recognition as currency or an asset, the more money bitcoin attracted, the more it brought scrutiny and regulation. In 2021, I wrote a piece 'The honeymoon is over for cryptocurrency. Now for the shotgun wedding ...', which notes:

“Whether the relationship between cryptocurrency innovators and governments is a marriage of convenience or a shotgun wedding, they’re setting up for a long-term relationship.”

The first day of the ETFs trading brought $4.6 billion in volume and the first 11 bitcoin ETFs are competing for market share. Some predict inflow of tens of billions, some predict hundreds of billions of investment to go into these ETFs. Everyone now has an opinion as to whether bitcoin has a future (or not), whether it is a risky asset (or not), and whether anyone should invest in it (or not). Almost irrelevant.

What's relevant is that the big money moved in and will take over. You might not like it, you might be against that, but that's about all you can do about it. In my opinion, the dream of anti-establishment currency is over.

But there is something more important happening. The underlying technology that is used for Bitcoin and Ethereum networks will now attract more attention. All these big companies, which had to convince the regulators to approve bitcoin ETFs, are building new infrastructure, learning about this new technology and preparing for the next phase of innovation.

For the last ten years or so, VCs have been investing in crypto startups, imagining all the possibilities, building foundational pieces, failing and learning. They've tested new ideas and concepts. Slowly, these startups will attract the attention of big companies. Together, they will prepare to take these innovations to market and create the environment for the new ideas and startups to emerge. That's the exciting recurrent pattern happening over and over.