Here’s How ETFs Managed By TradeFi Firms Could ‘Destroy’ Bitcoin: Arthur Hayes

Arthur Hayes, the founder of BitMEX crypto exchange, believes that the success of the long-awaited bitcoin exchange-traded funds (ETFs) will “completely destroy” the leading digital network.

In a blog post titled “Expressions,” Hayes argued that Bitcoin could die if all BTC in circulation ended up in the hands of traditional financial asset managers, most of whom would vie for ETFs.

Extinguishing Bitcoin

Hayes explained that his prediction is based on the differences between Bitcoin and other financial instruments used by mankind. Financial resources like gold and fiat exist due to natural laws, unlike BTC, which only exist if they move.

After Bitcoin reaches block 2140, rewards will be zero, and miners will only get paid to confirm transactions. This means that miners can only earn if the Bitcoin network is used. In the absence of more Bitcoin transactions, miners cannot afford the energy costs, which leads to the shutdown of their machines and then the death of the network.

File an application with the US Securities and Exchange Commission (SEC) to spot Bitcoin ETFs Traditional asset managers like BlackRock are at the forefront of stockpiling digital assets in preparation for the product's launch. To store the bitcoins in a “virtual vault,” Hayes said, they issue security for sale and charge management fees for their services, as they are unable to use the assets they hold on behalf of their clients.

Other government-controlled financial assets

The founder of BitMEX envisions a future where the largest Western and Chinese asset managers hold all BTC in circulation. He explained that such a situation can occur when investors confuse the financial asset with a store of value, choosing to buy Bitcoin ETF derivatives instead of BTC itself.

As a handful of organizations own all the BTC, there will be no real use for the blockchain, and the coins will never move again. Miners will destroy their machines, Bitcoin will become just another government-controlled financial asset, and it will die out of use.

On the bright side, the death of Bitcoin could lead to the creation of a new crypto network, which would become a financial asset that is not controlled by the government.

“Hopefully, the second time around, we'll learn not to give our private keys to buckets,” Hayes said.