Maelstrom CIO and former Bitmex CEO Arthur Hayes believes the arrival of Bitcoin (BTC) exchange-traded funds (EFTs) could be the catalyst needed to open more trading venues, which could attract billions of dollars in capital from the traditional finance (TradFi) markets.
Opening Up the Doors of Bitcoin for More Market Participants
A new blog post from the prominent Bitcoiner and early adopter of the digital asset stated the approval of spot Bitcoin ETF trading in the US will allow more people to partake in the BTC ecosystem. From there, they could have the opportunity to earn based on the difference in fluctuations of the coin at US benchmarks.
“Bitcoin is a global market, and price discovery happens primarily on Binance (I guess based in Abu Dhabi),” wrote Hayes. “For the first time in a long time, the Bitcoin markets will have a predictable and long-lasting arbitrage opportunity.”
“Hopefully, billions of dollars of flow will be concentrated in an hour-long period on exchanges that are less liquid and price followers of their larger Eastern competitors,” the cryptocurrency personality went on. “I expect there to be juicy spot arbitrage opportunities available.”
Hayes also brought up how Hong Kong is likewise gearing up to offer its own spot ETF products based on Bitcoin. He expects their services to be rendered at a “China southbound flow.”
“Whatever happens in New York and Hong Kong, neither city will allow fund managers to trade Bitcoin at the best price, but they may only trade on ‘select’ exchanges,” Hayes noted. “This unnatural state of play only serves to create more market inefficiencies from which we, as arbitrageurs, can profit.”
ETF Financing Concept
Other interesting solutions pushed by Hayes’ article were the prospects of ETF-based financing and Bitcoin for ETF swaps. These, he explained, could pave the way to the realization of a true end-to-end Bitcoin economy.
Hayes pointed out that it’s currently very difficult to borrow fiat with Bitcoin collateral. On the other hand, TradFi is no stranger to lending against liquid ETFs.
“Getting competitively priced fiat loans in large size will now be possible as long as you pledge Bitcoin ETF shares,” he claimed. “The problem for those who believe in financial freedom is maintaining control of one’s Bitcoin and taking advantage of this cheaper capital.”
Thus, Hayes proposed, “The solution to this problem is a Bitcoin for ETF swap.”
To illustrate how this would work, he said, “APs who can borrow in the interbank market will create ETF shares and hedge out the Bitcoin/USD price risk.”
“This is the create-to-lend business,” he added. “In delta-one speak, it’s the repo value of the ETF shares.”
Final Thoughts
Arthur Hayes, being the visionary that he is, surely presents a pretty exciting future scenario not only in the future of Bitcoin but also in the future of finance. He, however, previously warned that the road toward these realizations could be bumpy.
Despite his confidence that BTC may one day reclaim or even surpass its all-time high prices above $60K, he sees the digital asset entering into a correction between 30% to 40% by March. With this, it will be a “no-trade zone” for him now until April to manage risks.