Spot Bitcoin ETF from TradFi Has Potential to Bring Disaster for Bitcoin
BitMEX co-founder Arthur Hayes has raised concerns about the impact of traditional finance (TradFi) firms like BlackRock launching a spot Bitcoin ETF, warning that it could lead to the downfall of Bitcoin. In a blog post released today, Hayes explains that the decentralized nature of Bitcoin, which separates money and finance from state control, is at risk if Bitcoin ETFs managed by traditional asset managers dominate the market.
Hayes uses an analogy to illustrate his point, stating that while gold and paper would still exist if buried in a hole and retrieved after a century, Bitcoin thrives on movement and ceases to exist if it stops moving. He points to BlackRock’s strategy as an example of how traditional finance approaches Bitcoin. By storing Bitcoin and issuing tradable securities like ETFs, they can shift the focus from owning actual Bitcoin to trading ETF derivatives. Hayes believes this could undermine the true purpose of the Bitcoin blockchain.
Hayes envisions a scenario where major asset managers accumulate Bitcoin, essentially immobilizing it in a “metaphorical vault.” This could lead to a stagnation of Bitcoin transactions, jeopardizing the network’s sustainability and ultimately the existence of Bitcoin itself. He emphasizes the crucial role of miners in his argument, stating that the reduced use of the Bitcoin network due to the prominence of Bitcoin ETFs could cause miners to cease operations. Without miners, the network would die, leading to the demise of Bitcoin.
Despite these concerning predictions, Hayes sees 2024 as a pivotal year for Bitcoin. He believes that with the expected approval of a spot Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC) and the influence of global political and economic factors, significant changes could occur for Bitcoin. Currently, Bitcoin’s price has slightly declined, trading at $43,613, with a 1% decrease in the past 24 hours and an 11% decline in trading volume. Analyst Ali Martinez advises caution, noting a decrease in the Estimated Leverage Ratio among traders.