Spot ETFs Could Pose a Threat to Bitcoin, Says BitMEX Founder
Arthur Hayes, the founder of BitMEX, warns that the traditional finance (TradFi) industry could potentially exert excessive control over Bitcoin if they gain control over spot BTC exchange-traded funds (ETFs). In a recent essay, Hayes expresses concerns that if ETFs managed by TradFi asset managers become too successful, they could “completely destroy Bitcoin.”
Movement of Bitcoin Essential for Survival
Hayes emphasizes the importance of movement within the Bitcoin network to ensure its survival. Miners rely on transaction fees as block rewards gradually decrease and eventually reach zero. If institutions hold most of the coins in cold storage for their ETFs without facilitating enough BTC movement, there won’t be sufficient fees generated to secure the blockchain.
The Risk of TradFi Asset Managers Holding All Bitcoin
In his essay, Hayes envisions a future where Western and Chinese asset managers hold all circulating Bitcoins. Due to confusion and laziness among investors, people would purchase Bitcoin ETF derivatives instead of holding the actual cryptocurrency in self-custodied wallets. This scenario would result in stagnant coins with no use for the Bitcoin blockchain, leading to miners shutting down their operations.
Bitcoin’s Current Price
At the time of writing, Bitcoin is priced at $43,902.
Hot Take: The Potential Threat Posed by Spot ETFs
BitMEX founder Arthur Hayes raises a crucial concern regarding spot BTC exchange-traded funds (ETFs) managed by traditional finance (TradFi) asset managers. He warns that if these ETFs gain too much success, they could have detrimental effects on the future of Bitcoin. Hayes highlights the significance of movement within the network to ensure rewards for miners and the security of the blockchain. However, if institutions hoard most of the coins for their ETFs without facilitating BTC movement, fees will not be generated, posing a threat to the network’s decentralization. This scenario could lead to the demise of Bitcoin if miners are unable to cover their energy expenses.
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