I don’t understand why people want a Bitcoin ETF.

I mean, I get that retail investors want exposure to Bitcoin. Who wouldn’t? Bitcoin has outperformed every asset class in the last decade, with an annualized return of infinity percent!

But treating a utility as a speculative asset is a great way to ruin its utility. A high Bitcoin price results in high transaction fees, and high transaction fees make for a sucky medium of exchange. For those who actually care about using Bitcoin as a peer-to-peer payment service, speculative traders are a pain in the ass.

It’s not just Bitcoin, either:

Due to incredibly high gas prices, we're preventing new ETH and asset deposit addresses from being created. Existing deposit addresses will work as normal.

— Bittrex (@BittrexExchange) January 6, 2018

Here’s a story: The first petroleum-fueled combustion engine was created in 1873. That was a big deal. Combustion engines had previously run on coal gas, which provides limited mechanical energy for a volume of fuel. Whereas gas-fired engines were big and stationary, liquid petroleum engines could be mobile.

Wall Street immediately recognized the potential, rushed in to HODL petroleum, and sent light sweet crude to the moon. Gasoline become unaffordable, and the automobile never advanced beyond a plaything for the wealthy elite.

Or how bout this: In 1882, Thomas Edison switched on the first system for electrical power distribution. Over the next few years, competing currents battled to connect America’s homes. The most enterprising individuals saw rising demand for copper wire, cornered the copper supply, and made conducting metals inaccessible to the masses. Electricity failed as a consumer product and was forgotten as a scientific curiosity.

One more: In 1669, German alchemist Hennig Brand was examining his own urine when he discovered the elemental form of Phosphorous¹. As it turns out, phosphorous is crucial to fertilizer production. Speculators took to hoarding phosphate rock and bodily fluids, fertilizer became too expensive for agricultural use, and civilization fell into a Malthusian trap, where we live on the brink of starvation today.

None of those things happened. It doesn’t make sense to hoard a commodity because humans always figure out how to make things cheaper. No matter how often alarmists scream about Peak Oil and Peak Copper and Peak Phosphorous and Peak Coal and Peak Water and Peak Gold, commodity prices have stayed constant in the long run. To believe otherwise is to ignore thousands of years of human progress.

Bitcoin has only one unassailable use case: It pays transaction fees on the Bitcoin network. For everything else — whether remittances, micropayments, or means of cyber-extortion – there exists a substitute. What do Bitcoin ETF buyers think they’re getting here? A cryptocurrency is not a business – software contributors aren’t employees, and they’re certainly not working to maximize returns for investors. In fact, they’re working towards the opposite: Recent developments enable users to create more transactions while paying lower fees, and do Bitcoin things without even using Bitcoin.

Maybe ETF buyers have priced in decades of technological advancements, and are buying a future where the nation-state is dead, layer-2 networks are ubiquitous, and all the world’s wealth is denominated in Bitcoin. That would be nice. But the current price action is a great way to guarantee we’ll never get there.

1. Brand was looking for gold in the yellow liquid. Is it just me or does this seem like a particularly German thing to do?