Bitcoin ETFs: New Strategy in Crypto Market Dynamics?

The cryptocurrency community is buzzing with a new theory proposed by PlanB (@100trillionUSD), the creator of the Bitcoin Stock-to-Flow (S2F) model. In a series of tweets, PlanB suggests that Exchange-Traded Funds (ETFs) like BlackRock are currently acquiring Bitcoin through miners, not exchanges. This indirect purchasing method could be a strategic move to avoid significant price impacts on exchanges while still influencing the hashrate, potentially explaining the recent surge in mining activity, according to 100trillionUSD.

PlanB posits that buying Bitcoin indirectly from miners could have a different or delayed effect on the market price compared to direct purchases on exchanges. This theory is grounded in the notion of arbitrage between purchasing Bitcoin with dollars directly (investors) or with kilowatt-hours indirectly (miners). He raises the possibility that miners might possess information not yet known to investors, or that ETFs could be actively buying through miners.

However, Dan Held (@danheld), another influential figure in the Bitcoin community, challenges this theory. He argues that all Bitcoin trades, whether Over-The-Counter (OTC) or through a lit order book, impact the price due to the identical amount of coins being bought or sold each day. If miners choose not to sell on exchanges and opt for OTC deals, it still influences the aggregate supply and demand.

Adding another layer to this discussion, PlanB speculates about the potential impact of ETFs negotiating fixed prices for large Bitcoin purchases. He questions whether less demand on exchanges from ETFs (due to buying OTC from miners) and less supply on exchanges (as miners sell OTC to ETFs) could lead to different market dynamics.