One thing that can kill bitcoin

As Bitcoin continues to grow, hitting new year highs and gaining mainstream adoption, BitMEX's former CEO Arthur Hayes says there are concerns it could undermine Bitcoin's essential identity.

Hayes' speech sheds light on how Bitcoin's institutional protection could transform it from a tool of financial freedom to an institutional asset.

Institutional Interest: The Real Bitcoin Killer

Since its inception, Bitcoin has been ethically a decentralized financial system, operating without any centralized authority. It stands in stark contrast to traditional financial systems, which Hayes describes as statist money, “which is here for us, for the people. However, approving institutional interest, especially spot Bitcoin ETFs (exchange-traded funds), can be a double-edged sword.

Hayes, in a recent interview, laid out a very sad scenario. He speculated about the possible consequences for traditional financial authorities like BlackRock CEO Larry Fink and their ilk if they decided to get a large portion of Bitcoin's free circulation. This move could shift Bitcoin from being an instrument of financial freedom to another asset under institutional control.

The main concern is how these institutional behemoths can control Bitcoin and change its fundamental use case. Hayes suggested that if entities like BlackRock and Fidelity entered the fray by launching a Bitcoin mining ETF, it would be akin to becoming “agents of the government.”

Read more: What is Bitcoin? The ultimate guide to Cryptocurrency

In Hayes's view, the state's agenda to tax citizens in a fiat banking system may find a new ally in these institutional entities. If these institutions store Bitcoin in ETF vehicles, the essence of Bitcoin — being a decentralized, leveraged currency — is lost.

“You can't actually use Bitcoin. It is a financial asset. It's not the actual bitcoin itself,” Hayes explained.

Hayes also warned that an entity like BlackRock's ETF could “kill Bitcoin” if it becomes too valuable. Stored Bitcoin becomes a stationary asset rather than a floating currency. And this is trading “high sugar prices today for tomorrow's destruction.”

Once again, institutional capital fuels the bull run.

The main point of Hayes' argument is that Bitcoin's main strength lies in its decentralized nature. It enables financial inclusion and independence. However, institutional adoption, especially the adoption of spot Bitcoin ETFs, could be the precursor to Bitcoin losing its essence.

On the other hand, the influx of institutional interest creates a strong impression on the crypto market. Rachel Lin, CEO of DEX SynFuture, believes that Bitcoin could approach $50,000 by the end of the month based on historical trends.

“Over the past week, October's nickname ‘Uptober' has skyrocketed, with Bitcoin up nearly 29 percent in value. Interestingly, looking at historical data, November tends to be better than October, with an average return of over 35% for Bitcoin. If it delivers similar returns this November, we could see BTC reach around $47,000, Lin said.

Read more: Why Bitcoin ETF Approval Could Fuel the Biggest Bull Run in Crypto History

Options data also shows bearish market sentiment. Big bets are being made on the expectation that Bitcoin will reach a higher price in the near future. This reflects the broader optimism in Bitcoin's potential to grow further with institutional demand.

“The top two options with the largest open interest as of today are the December 40,000 call and the December 45,000 call. Even the December 50,000 call option has open interest of 5,000 bitcoins. This suggests that a large number of people are betting that bitcoin will be significantly higher in two months than it is today.” It shows they are willing, Lin added.

Amid the excitement of potential financial benefits, a nagging question remains. Could the institutions that propel Bitcoin's value be the same entities that can rob it of its soul? The scenario painted by Hayes calls for investors to ponder the long-term implications of institutional demand for Bitcoin.