TradFi’s Spot Bitcoin ETF Could Spell Doom for Bitcoin

BitMEX co-founder Arthur Hayes has issued a stark warning: the success of traditional finance (TradFi) firms like BlackRock in launching a spot Bitcoin ETF could lead to Bitcoin’s downfall. His insights, articulated in a new blog post released today, paint a potentially bleak future for the world’s foremost cryptocurrency.

Hayes argues that the very essence of Bitcoin, which separates money and finance from state control, is at risk. He points to the potential dominance of Bitcoin ETFs, managed by traditional asset managers, as a direct threat to the decentralized nature of Bitcoin.

“Imagine a scenario where you bury gold and paper in a hole and return after a century – they would still exist. Bitcoin, however, thrives on movement. It’s the first monetary asset that ceases to exist if it stops moving.” – Arthur Hayes

BlackRock’s Bitcoin Strategy

Hayes highlights BlackRock’s strategy as indicative of the broader TradFi approach to Bitcoin. By storing Bitcoin and issuing tradable securities, such as ETFs, they could shift the focus from owning actual Bitcoin to trading ETF derivatives. This, Hayes fears, could undermine the actual use and purpose of the Bitcoin blockchain.

He envisions a scenario where major asset managers accumulate Bitcoin, immobilizing it in a “metaphorical vault.” This could lead to a stagnation of Bitcoin transactions, threatening the network’s sustainability and, ultimately, Bitcoin’s existence.

A crucial component of Hayes’ argument revolves around the role of miners. He suggests that the reduced use of the Bitcoin network, due to the prominence of Bitcoin ETFs, could lead miners to cease operations. “Miners are the lifeblood of the Bitcoin network, receiving Bitcoin as income for their role. Without miners, the network dies, and so does Bitcoin,” he asserted.

2024: The Pivotal Year for Bitcoin

Despite these ominous predictions, Hayes sees 2024 as a critical year for Bitcoin. With the expected approval of a spot Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC), coupled with global political and economic factors, Bitcoin could see significant changes.

As of the latest data, Bitcoin’s price has slightly declined, currently trading at $43,613. This comes amidst a 1% decrease over the past 24 hours, with a corresponding decline in trading volume by 11%. Analyst Ali Martinez urges caution, noting a decrease in the Estimated Leverage Ratio among traders.