First of all this isn’t an original idea, I read something somewhere and will definitely go pull the source. The general theme was that as paper bitcoin increase(etfs,dats etc) there will be less circulating bitcoin and thus transactions fees will be impacted negatively. It sounds plausible, I’m a bit stuck on the a holder is a holder no matter where they are self custody or third party, but do you think this will have cause transactions to drop off over time as more adoption happens on the paper side?
ETF's and other "Paper Bitcoin" as you call them, do not reduce the circulating supply, since they are not real Bitcoin. They just concentrate coins into custodial wallets. But on-chain activity by retail and institutions is
reducedmreduced since those
invesotrsinvestors trade ETF shares instead of moving real Bitcoin on-chain. And yes, that could negatively impact transaction fee revenue if most of the Bitcoin is in custody.
But it could just as well increase fees by driving broader adoption.
Wait and see, but the second scenario seems more plausible.