A thing has only advantages and no disadvantages. This is a very scary thing. It means that you don’t know what you don’t know and you don’t know the blind spots of your thinking, so you only see the advantages and cannot see any disadvantages.
The establishment of the Bitcoin ETF is first of all good for Bitcoin, because a large amount of US dollar funds flow into Bitcoin through the ETF, pushing up the price. Since its opening on January 11, 2024, $11.8 billion has flowed into the Bitcoin ETF. Recently, as Bitcoin exceeded $70,000, ETF inflows have increased sharply. On March 12, 2024, the Bitcoin ETF saw a single-day inflow of US$1.045 billion. On March 13, 2024, Bitcoin ETFs, USDT, and USDC collectively saw a record inflow of $1.378 billion.
However, there is no asset in the world that only rises but never falls. If Bitcoin falls, Bitcoin ETF funds are likely to flow out. In the past, Bitcoin had put options on Tether. As long as Bitcoin fell, Tether could create something out of nothing, print USDT to partners at zero cost, buy Bitcoin, push up the price, and maintain stability. Now, if there is an outflow of funds from the Bitcoin ETF, it will require real money to sell the Bitcoin and exchange it for U.S. dollars. ETF investors only recognize US dollars, not stablecoins, and Tether can only print USDT, not US dollars. In this way, Tether's bottom-line effect will be significantly weakened, and it may also create a difference between the US dollar transaction price of Bitcoin and the USDT transaction price, creating room for arbitrage, exacerbating the pressure on USDT to be exchanged for the US dollar, and affecting stability.
When Bitcoin ETFs account for the majority of Bitcoin capital flows, it is a time to test Tether's ability to control the market. Bitcoin ETFs bring huge benefits when funds flow in, but they also bring huge challenges when funds flow out, thus reshaping the cryptocurrency ecosystem.
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