Former BitMEX CEO Warns Spot Bitcoin ETFs Could Imperil Bitcoin's Future
Summary:
In a recent blog post, Arthur Hayes, former CEO of BitMEX, warned of the potential risk spot Bitcoin ETFs could pose to the cryptocurrency's existence. Hayes stated that if Bitcoin ETF issuers end up holding all Bitcoin and investors engage in buying derivatives instead of HODLing, the number of transactions could significantly shrink, discouraging miners from validating transactions due to reduced incentives. Consequently, this could lead to the Bitcoin network's collapse. He further speculated that if Bitcoin becomes state-controlled and isn't used, it could die, but this could pave the way for a new, non-state-controlled monetary system.
The former CEO of BitMEX, Arthur Hayes, has raised concerns over the potential impact of successful Spot Bitcoin exchange-traded funds (ETFs), suggesting that they could ultimately lead to the demise of Bitcoin. Hayes, who helped establish the BitMEX cryptocurrency exchange in 2014, detailed in a blog post dated December 23rd that Bitcoin's value comes from its motion.
However, he notes that spot Bitcoin ETFs are designed to absorb assets and hold them in a figurative vault. If the companies issuing these ETFs hold all Bitcoin and policyholders buy Bitcoin derivatives instead of retaining them (HODLing), this could significantly reduce the number of transactions within the network. This decrease could then affect miners, removing their incentive to continue verifying transactions.
Hayes further explained, if the scenario persists, miners may end up with no other option but to switch off their machines as they cannot afford the energy costs involved. Without the miners' contributions, the network could collapse, thus leading to the disappearance of Bitcoin.
The potentially disruptive effects of traditional finance (TradFi) asset managers' ETFs on Bitcoin should not be underestimated, according to Hayes. If they achieve too much success, they could contribute to the destruction of Bitcoin.
Hayes also speculated on the potential aftermath of such a grim development. He envisioned the rise of a new cryptocurrency monetary network, one that would fill the vacuum created by Bitcoin's departure while even improving on Satoshi Nakamoto's original concept of peer-to-peer electronic money. For Hayes, this progression would be beautiful.
He stresses that if Bitcoin is reduced to just another state-controlled asset and barely used, it will die. But the phenomenon promises the emergence of a non-state-controlled financial asset/system. He hopes that, in such an era, people will be careful not to leave their private keys in the custody of Wall Street firms.
The anticipated approval of all pending Spot Bitcoin ETF applications is scheduled for the period between January 5 and 10 of 2024. Several firms including BlackRock, Grayscale, Bitwise, WisdomTree, Invesco and Galaxy, Fidelity, Ark Invest, Valkyrie, Franklin, Hashdex, Global X ETFs and Pando Asset are eagerly awaiting the SEC's decision regarding their Spot Bitcoin ETF applications.
Published At
12/25/2023 4:30:00 AM
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