(Bloomberg) -- Asset manager VanEck’s Bitcoin ETF is listed under the ticker ‘HODL,’ highlighting a dilemma facing buyers of the popular investment vehicles. 

Hodl has long been the mantra of Bitcoin true believers during the market routs and rallies that have been a hallmark of the sector since the earliest days of the digital-asset world, when “hold” was misspelled by a frenzied advocate on an online forum in 2013.

But buying and holding has major drawbacks: It hinders the development of the blockchain for use cases besides speculation. Ethereum is actually the most commercially used blockchain. And for investors, it becomes a bit of a game of chicken where those who hang on the longest are at risk of being left holding the bag for those who exit the often volatile market. 

“There is a collective action problem here,” said Hilary Allen, a professor at American University’s Washington College of Law. “All holders will theoretically be better off if no one sells, but then no one can actually realize any profit on their investment.”

About 70% of available Bitcoin hasn’t traded in more than a year, up from about 54% three years ago, according to data compiled by CCData. If the price can double in short order, it’s not going to be used to buy a pizza, to play games or for financial services. 

Bitcoin has tripled since the start of last year as the crypto market recovered from the scandals and bankruptcies that marred 2022 and expectations grew that the Securities and Exchange Commission was moving closer to approving the US spot exchange traded funds. Bitcoin was little changed at around $51,637 on Thursday.

The January approval of 10 US ETFs has resulted in net investor inflows of more than $5 billion, making their debut among the most successful ever of new investment products. 

Still, skeptics question the long-term benefits of the ETFs. Bitcoin is still a pernicious phenomenon with no intrinsic value because of the lack of cash flow or other returns despite the approvals, two European Central Bank staff members wrote in a blog post on Feb. 22. 

And while many Bitcoin advocates such as MicroStrategy Chairman Michael Saylor and crypto exchange Gemini co-founder Cameron Winklevoss warn of supply shortage because of demand from ETFs, liquidity in the crypto market is actually getting better since the introduction of the funds.

“To be clear, there’s nothing wrong with hodling,” said Campbell Harvey, a finance professor at Duke University. “But if everybody did it, there would be essentially no trading and extreme illiquidity.”   

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