With the surge in spot Bitcoin ETF applications, Wall Street is poised to engage directly with Bitcoin. While traditional financial institutions are likely to promote it as a risk-off safe-haven investment, ETFs offer a different type of Bitcoin investment than what’s available on a traditional crypto exchange. Spot Bitcoin ETFs are not offering a decentralized, censorship-resistant bearer asset.
Dave Birnbaum is the product director at Coinbits, a Bitcoin investment platform, and a prolific inventor, with patents in fintech, VR, communications and more. David Waugh is a business development and communications specialist at Coinbits. He previously served as managing editor at the American Institute For Economic Research.
Wall Street cannot market these values of Bitcoin because it cannot offer them. However, companies specializing in Bitcoin technology and custody can use Wall Street’s marketing campaign to highlight their comparative advantage and gain market share. These Bitcoin companies should plan for such marketing, identify the gap between the ETF narrative and reality, and capitalize on the difference.
The Wolves of Wall Street
"There's blood in the water. Let's go kill!" screamed former CEO John Mack on Morgan Stanley's trading floor in the 1980s. Although new regulations and a softer corporate environment have tamed its culture, Wall Street's objective remains the same: earn money selling financial products. A spot Bitcoin ETF is no different.
Selling Bitcoin products poses a unique challenge for these incumbents because it forces them to promote a technology that threatens their role as financial intermediaries. And so they must create products that capture Bitcoin's allure while obscuring its core tenets. Think of it as "Bitcoin Lite": digestible for investors, tamed for regulators, and lucrative for issuers. It's a narrative that turns Bitcoin from a revolutionary tool to just another item on the financial menu.
Drawing upon proven marketing narratives for existing ETFs, Wall Street marketing teams are already formulating narratives about why people should buy shares of a spot Bitcoin ETF.
What are they likely to be?
Narrative 1: “If you hold bitcoin in self custody, your coins could be lost or stolen.”
Wall Street will weave a narrative about Bitcoin ETFs based on the successful promotion of gold ETF products starting in 2004. They will frame self-custody as risky and inconvenient, just as holding gold oneself is risky and inconvenient.
This narrative will allude to the complexity and unfamiliarity of holding your private keys with Bitcoin hardware wallets and seed phrases. Following the playbook of Celsius, a scandal-ridden and now-defunct cryptocurrency exchange, it will highlight the estimated millions of bitcoins permanently immovable due to the destruction or loss of private keys.
Bitcoin companies will need to counter thus: Although users must learn the process for custodying Bitcoin, holding private keys at home or in a safe deposit box can be secure and easy. Consumers can now use innovative “collaborative custody” apps that securely distribute private keys among household members. These apps allow each person to recover funds without anyone having the ability to move them without others’ permission.
Narrative 2: “If you hold bitcoin on an exchange, your coins could be lost or stolen.”
Another tactic will be to highlight the recent insolvencies and fraudulent practices of crypto exchanges such as FTX, Celsius, Voyager, and BlockFi. Expect Wall Street executives to use buzzwords like "under-regulated," juxtaposing their firms with crypto exchanges.
Wall Street spends tremendous time and money on compliance. Despite consumers bearing these costs, incumbent financial firms do appear safer than the recently fallen crypto platforms in the eyes of consumers.
Bitcoin companies must explain that there are sources to obtain Bitcoin other than exchanges that hold a fraction of customer deposits on hand, namely bitcoin-only brokerages and peer-to-peer transactions. They must also frame self-custody as a "third way" with manageable risks but overwhelming advantages.
Narrative 3: “Nervous about market volatility? Move into bitcoin with a click.”
Fink's interview marks the first step in a broader strategy to shift Bitcoin's correlation from investor greed to investor fear. The new narrative shows that BlackRock recognizes Bitcoin's potential for storing value during volatile market conditions. Remember, asset managers primarily make money on flows, not gains. If the marketing narrative of a "flight to safety" dominates, firms like BlackRock on Wall Street can take advantage by encouraging people to move in and out of Bitcoin as the fear and greed index oscillates.
As Wall Street makes the case against institutional custody by promoting Bitcoin as a risk-off asset, Bitcoin companies can directly benefit. While asset managers spend the marketing dollars to promote this narrative, Bitcoin firms can reuse what works and build upon it to teach our customers the true value of owning physical Bitcoin.
Narrative 4: “With bitcoin available through regulated brokerages, there is no longer a reason for individuals to self custody.”
Regulators are setting the stage for a national security narrative, with Wall Street likely to follow suit. With ownership of bitcoin by elite Americans already widespread, a viable option to “access” Bitcoin through regulated brokerages is necessary before momentum for banning self-custody can build.
Bitcoin companies must prepare for a battle of ideas by explaining that the right to use Bitcoin emanates from natural law, freedom of speech, privacy, and property rights. Bitcoiners are already discussing these issues. Thought-leaders can win the public's hearts and minds, but we must anticipate that Wall Street's marketing engine, easy-to-use financial products, and regulatory pressure will pose significant challenges.
The marketing narratives promoting spot Bitcoin ETFs will obscure this groundbreaking innovation in money technology – Bitcoin – as a traditional financial product. Although Wall Street may characterize Bitcoin with half-truths, or even misleading narratives, the marketing dollars they spend will generate interest. Bitcoin companies will have the unique opportunity to harness the public's attention and offer a complementary narrative about Bitcoin as a decentralized, censorship-resistant bearer asset.