Spot Bitcoin (BTC) exchange traded funds (ETFs) are no longer new in the financial scene but their entry in the US will certainly mark a pivotal moment in the future of finance and cryptocurrencies. However, BitMex co-founder Arthur Hayes warns that too much success of these instruments could prove to be detrimental to the Bitcoin ecosystem.
A Caveat Against Spot Bitcoin ETFs
In Hayes’ blog post on December 23 that covered a mishmash of topics ranging from his Japanese adventures to crypto, the former BitMex CEO went beyond the spot Bitcoin ETF hype train to how they would “completely destroy” Bitcoin if they become “too successful.”
For the American entrepreneur, the very fabric of Bitcoin’s existence lies in its ability to be traded. That’s because when all of the digital asset’s 21 million supply cap has already been mined by 2140, the only way miners could earn from it is by validating blockchain transactions.
“In essence, if Bitcoin moves, it has value,” said Hayes. “But if there was never another Bitcoin transaction between two entities, miners would be unable to afford the energy it costs to secure the network.”
“As a result, they would shut off their machines,” he added. “Without the miners, the network dies, and Bitcoin vanishes.”
The idea of traditional finance (TradFi) entities hoarding the digital asset in a “metaphorical vault” only to trade them via derivatives will dry up transactions according to Hayes. Eventually, the incentive of miners to keep validating transactions is diminished until they gradually move to more rewarding crypto ventures.
Bitcoin getting in control of regulated investment managers would end up deconstructing its decentralized framework and it becomes just another “state-controlled financial asset.” However, Hayes envisions the entry of an alternative that would stay true to Satoshi Nakamoto’s goal in the demise of the Bitcoin blockchain.
“It is beautiful when you think about it,” Hayes pondered. “If Bitcoin becomes just another state-controlled financial asset, it dies because it isn’t used.”
“The people will once again have a non-state-controlled monetary asset and financial system,” the investor stated. “Hopefully, the second time around, we will learn not to hand our private keys to the baldies.”
Hayes’ foresight may be too far forward in the future but crunching them down paints a bleak scenario should the Wall Street personalities whom he called “baldies” were to control Bitcoin’s supply and movements.
Spot Bitcoin ETF Approvals in the US
Bitcoin currently stands at a critical point where the approval or denial of its spot ETFs could either make or break it. Right now, there is optimism that the US Securities and Exchange Commission (SEC) will greenlight them by January 2024 considering how the regulator has been fast-tracking the process with hard deadlines and pushing the applicants to adopt a model that it prefers.
Estimates vary as to how BTC will move past the approval of its spot ETFs, but industry players are betting $80K to $100K for the crypto. ARK Invest CEO Cathie Wood even laid down a super bullish forecast of $1 million per BTC on the way to 2030.