When Satoshi Nakamoto created Bitcoin he envisioned decentralized money. Bitcoin is designed to be secure and pseudo-anonymous cash that can be sent anywhere in the world to buy anything instantly. Bitcoin’s success from 2009-2015 mostly stemmed from people using Bitcoin as decentralized money, and the crypto space was much healthier. If institutional investors arrive and buy tremendous amounts of Bitcoin, the impacts on Bitcoin could be catastrophic. We may be left with nothing more than another form of centralized money.
Currently crypto companies are bending over backwards to attract institutional investors with hedge funds, custodian services, and regulatory compliance. Crypto exchanges and companies have removed Bitcoin’s anonymity in the process, and have turned it into a centralized form of money for their customers. The situations on Coinbase where Bitcoins are getting frozen is just a microcosm of what is to come if the wealthy establishment takes over the crypto space.
Most of the crypto space is excited about the launch of physical Bitcoin futures on Bakkt in December 2018, it is thought that Bitcoin will rally since this will provide a mechanism for institutional investors to directly buy Bitcoin on major stock trading platforms. This is because these futures are physical and will be settled daily, so institutional investors who buy the Bakkt futures will receive Bitcoins in their account the same day.
Bitcoin’s price going up from institutional investment obviously has the positive benefit that HODLERS will get rich quickly. However, what about the people who have yet to buy Bitcoin, and people who cannot afford to buy much Bitcoin at this time? Bitcoin’s price will go up so high that people will not be able to afford more than a minuscule fraction of a Bitcoin, and this is basically already happening. Beyond this, people treating Bitcoin as an investment causes them to hoard the supply of Bitcoins, hurting Bitcoin’s usability as a currency.
Further, if most of the Bitcoin is purchased by institutional investors, it will centralize the crypto space into the hands of the same wealthy people that have turned the global financial system into the biggest scam of all time. If banks, financial institutions, and major corporations buy most of the Bitcoins, then they will have near total control of the Bitcoin market. They can then manipulate Bitcoin’s price to make money, at the expense of everyone trying to use Bitcoin as a currency.
It gets worse, imagine if banks and the government control almost all of the supply of Bitcoins, then they could disable withdrawals to external wallets. This would completely convert Bitcoin into centralized money, with only a few rogue decentralized Bitcoins left in the world. Robinhood is a company that already does this, external withdrawals are not allowed, and somehow people think this is fine and still use that platform.
In a similar vein, the centralization of the Bitcoin mining industry could be catastrophic. Personal mining at home is becoming obsolete at this time, and now Bitcoin mining is almost entirely done by big companies like Bitmain. As this progresses, they could eventually be coerced by the governments of the world to freeze addresses and reverse transactions, totally destroying Bitcoin’s decentralization.
The solution is clear, Bitcoiners need to stop feeding into the hype that institutional investment is a good thing. Many Bitcoiners are short sighted and think the short term profits from institutional investors would be amazing, without realizing that Bitcoin itself may be destroyed long term if institutional investors take over the space.
Currently the Bitcoin market cap is less than USD 100 billion, while tens of trillions of USD circulate in the global financial markets. Bitcoin is vulnerable to a hostile takeover, and we must protect it by scaring the institutional investors away.