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End of Bitcoin (BTC)? Arthur Hayes Exposes Pitfalls of Bitcoin ETF Derivatives

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Sat, 23/12/2023 - 11:21
End of Bitcoin (BTC)? Arthur Hayes Exposes Pitfalls of Bitcoin ETF Derivatives
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In a recent blog post, Arthur Hayes, the co-founder of BitMEX, raised concerns about the potential pitfalls of Bitcoin (BTC) exchange-traded fund (ETF) derivatives, suggesting that their success managed by traditional finance (TradFi) asset managers could lead to the demise of Bitcoin itself. According to Hayes, if Bitcoin becomes just another state-controlled financial asset, it risks losing its value as it relies on constant movement and usage.

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Hayes begins his blog with a light-hearted anecdote about his love for Hokkaido king crab legs, drawing a parallel between the uniqueness of certain expressions in the culinary world and the exceptional value of Bitcoin in the financial realm. He emphasizes that Bitcoin, and the broader crypto market, have proven to be the best expression of the fiat debasement trade, outperforming traditional assets like gold, S&P 500 and Nasdaq 100.

Bitcoin's existential crisis

Arthur Hayes' most striking assertion in his blog post is the potential existential threat posed by the widespread success of Bitcoin ETFs managed by traditional asset managers. Hayes argues that if these ETFs become too successful, accumulating a significant portion of available Bitcoin, the very nature of Bitcoin as a cryptocurrency that relies on constant movement and usage could be jeopardized.

In his scenario, large financial institutions holding Bitcoin through ETFs might not utilize the cryptocurrency, leading to a lack of transactions. This lack of movement could ultimately result in miners being unable to cover the energy costs required to secure the network. Consequently, miners may be forced to shut down their machines, effectively extinguishing Bitcoin.

Hayes paints a vivid picture of a future where Bitcoin, once hailed as a decentralized and state-independent currency, becomes just another controlled financial asset, with its demise paving the way for a potential rebirth of a different crypto monetary network. This dramatic prediction underscores the delicate balance between the traditional financial world and the ethos of decentralization within the cryptocurrency space.

As the blog concludes, Hayes offers a stark choice to investors in the face of ongoing fiat debasement: either trade financial assets to earn more fiat or preserve wealth in energy terms by using a financial system outside of the state's control, namely, by buying and holding Bitcoin in self-custodial wallets. Overall, Arthur Hayes offered a thought-provoking analysis, urging investors to carefully navigate the myriad options and potential pitfalls in the crypto space.

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