On November 1, the “On the Margin” podcast from Blockworks featured Arthur Hayes, ex-CEO of BitMEX and a popular publicist on crypto and markets. In this “Bursting Of The Sovereign Debt Bubble” release, a crypto industry veteran expressed concerns about spot Bitcoin ETFs. His worries are mainly related to BlackRock and the possible centralization of Bitcoin. We have highlighted three key points.
If you are not aware of spot Bitcoin ETFs and the hype around them, read our articles: "What is a spot Bitcoin ETF, and why does everyone talk about it" and "What's happening with Bitcoin ETFs, and will BTC reach the moon".
Arthur Hayes’ opinion on spot Bitcoin ETFs: they may turn BTC into an institutional asset
According to Hayes, spot Bitcoin ETFs are quite a twofold phenomenon.
On the one hand, the beauty of Bitcoin is in its decentralisation — anyone can buy, sell, or exchange the cryptocurrency. The arrival of large institutional players will certainly increase the value of Bitcoin and the crypto market as a whole in dollar terms.
On the other hand, this scenario has three negative consequences:
1️⃣ Firstly, spot Bitcoin ETFs are not Bitcoin itself but a financial asset backed by real Bitcoin. These Bitcoins might just stay on the fund managers’ addresses, which contradicts the idea that BTC is a means of payment.
On a personal note, this is a pretty big topic of debate: is Bitcoin "digital gold" or "the money of the future"? There is no one right answer here, but actually that is its uniqueness—it combines the features of both.
2️⃣ Secondly, all investment companies are subject to the laws of the countries in which they are located. As Arthur Hayes says, these firms are "agents of the state".
BTC is harder to control than the traditional financial system. Now, with the launch of spot Bitcoin ETFs, there could be a situation in which states control both the coin and fiat money, managed by investment companies. In general, such companies are "another bank" where people's money lies under the strict supervision of the state.
3️⃣ Third, BlackRock is known to be the largest holder of shares in the major Bitcoin mining companies. This creates an additional risk, which is a continuation of the point above. There could be a situation where some sort of privacy or security upgrade is required.
This begs the open question: will large miners managed by large investment funds accept updates that go against the interests of governments?
Arthur Hayes cites the example of the oil industry. Currently, it survives through a decline due to ESG policies (those require that environmental, social, and corporate governance issues be taken into account when investing in companies). BlackRock and other major investment firms follow these policies and manage oil companies through boards of directors.
↪️ To summarise, Arthur Hayes fears that Bitcoin is turning from digital decentralised money into a financial asset that would be controlled by institutional players. Yes, this will have a positive impact on the price, but it puts the future of Bitcoin at risk.
Ironically, the podcast host, Michael Ippolito, said that if the spot Bitcoin ETF is adopted, the future bull cycle could be called the "real institutional cycle". Hopefully, it will not be the last one.
Who is Arthur Hayes in crypto
Arthur Hayes is a veteran of the crypto industry. In 2014, he founded the BitMEX exchange, which was then very popular. However, due to problems with the Commodity Futures Trading Commission (CFTC) in 2020, Hayes resigned from his CEO position, surrendered to US authorities, and was released on $10 million bail.
The regulator's main allegations were that Hayes and his partners operated an unregistered company in the US while having a large number of American clients. They were also accused of violating CFTC rules regarding customer identification (KYC procedures).
However, mostly within the community, he is popular for his thoughts and essays on crypto, markets, world politics, and economics on Medium and X (formerly Twitter). Hayes’ thoughts and views on the future of the crypto always attract a lot of attention and are widely discussed.
By the way, on November 2, he tweeted that he bought SOL despite considering it a "Sam-coin piece of dogshit L1 that at this point is just a meme".
It is important to remember that everything Arthur Hayes writes is not investment advice but just an individual's opinion. He himself has invested in many tokens (here's his portfolio on Arkham Intelligence), so it is obvious that he is just bullish on cryptocurrencies in general, and his agenda is clear in advance of crypto in publications.
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