nneuman on Nostr: https://m.primal.net/JGoY.png Liquidity is often a big door on the way in and a small ...

Liquidity is often a big door on the way in and a small door on the way out.

For an asset like where systemic risk events are part of the investment thesis, what does that mean for bitcoin held in an ETF? Making good on that thesis will be difficult.

Because U.S. spot ETFs deal in cash, you’re boxed out of transacting directly with bitcoin through ETFs. There is no exiting with your bitcoin. When you sell your shares, that transaction will be settled in cash.

Selling for cash has its restrictions as well. ETFs primarily trade during market hours (ex. 9:30 a.m. to 4 p.m. EST in the U.S.). Meanwhile, bitcoin trades 24/7 globally. Traditional stock markets are open 20% of that time when you factor in holidays and weekends.

Imagine this scenario. Major news breaks after the market close on a Friday. The BTC price reacts sharply. You watch the candle move Saturday and Sunday. Monday is a holiday and markets are closed. By the time Tuesday opens, you’ve waited 89.5 hours.

Even when the market is open, significant volatility can trip circuit breakers and halt trading on securities exchanges. They can be triggered by declines of as little as 7%. That volatility melts brains in TradFi but doesn’t faze most long-time HODLers.

A 20% move could trigger a Level 3 breach on the NYSE, which halts trading for the rest of the day. All the while, the bitcoin market continues to trade undeterred worldwide. Granted, crypto exchanges have been known to go down too in times of high traffic, but going offline should be considered a bug vs. a feature in the old system.

A primary narrative around bitcoin is its optionality and the ability to exit the legacy financial system. During a recent market rally, BlackRock CEO Larry Fink described investors acquiring crypto as a “flight to quality” amid geopolitical risk. With an ETF, you should expect that flight to be in a holding pattern when markets are closed or disrupted. Furthermore, this dynamic begs the question: do you really own your asset if you can’t use it anytime you need it?

Your BTC ETF "ownership" comes with an asterisk (*). Exceptions apply, read the fine print for details. Unfortunately, lots of typical retail investors may not think this far. They just see number go up, and they buy into bitcoin via the ETF. Sharing the benefits of truly owning your BTC is critical as ownership grows and bitcoin becomes money.

ETFs help provide liquidity to the overall BTC market, but they lack bitcoin's depth of utility. Self-custody remains the best way to keep bitcoin in your control 24/7. By holding your keys, you realize the full benefits of BTC and aren’t hamstrung in tail-risk events. The door remains wide open.

This is why we're focused on building the safest, simplest self-custody possible at Casa. We have to make it easy for as many people as possible to hold their own keys and realize the full value of bitcoin. lopp (npub17u5…t4tp)