Spot Bitcoin ETFs could ‘completely destroy’ Bitcoin: Arthur Hayes

Spot Bitcoin ETFs Threaten Bitcoin's Value

In a blog post, Arthur Hayes, the co-founder of BitMEX, expressed concerns about the potential impact of spot Bitcoin exchange-traded funds (ETFs) on Bitcoin. He argued that if these ETFs become too successful, they could “completely destroy” Bitcoin.

According to Hayes, Bitcoin's value lies in its ability to move and be part of transactions. However, spot Bitcoin ETFs are designed to accumulate Bitcoin assets and store them away, which would reduce the number of transactions on the network.

If ETF issuers end up holding all of the Bitcoin and investors rely on Bitcoin derivatives instead of holding the cryptocurrency themselves, the number of network transactions will decline. As a result, miners will lose their incentive to validate transactions, potentially leading to the demise of the network.

A Potential New Monetary Network

Hayes speculated that if Bitcoin were to be controlled by traditional financial institutions through ETFs, it would lose its purpose and ultimately fail. However, he suggested that this could open the door for a new cryptocurrency monetary network that adheres to Satoshi Nakamoto's original vision.

In this scenario, people would once again have a non-state-controlled monetary asset and financial system. Hayes emphasized the importance of learning from past mistakes and not trusting Wall Street firms with private keys in the future.

The approval of pending spot Bitcoin ETF applications by the SEC is expected soon, and if successful, it could have significant implications for the future of Bitcoin.

Pending Spot Bitcoin ETF Applications

Several prominent asset managers, including BlackRock, Grayscale, Bitwise, and Fidelity, are awaiting the SEC's decision on their spot Bitcoin ETF applications. The approval of these applications is anticipated between January 5 and January 10, 2024.

While spot Bitcoin ETFs hold the potential for increased adoption and accessibility of Bitcoin, Hayes's warning highlights the potential risks involved. The impact of spot Bitcoin ETFs on the market and Bitcoin's future remains to be seen.