Now comes a Bitcoin (BTC) exchange fund or spot Exchange-traded fund (ETF) seems to be becoming a reality, the crypto world is eagerly awaiting approval. Expectations are high, but Arthur Hayes, co-founder and former CEO of crypto exchange BitMEX, issues a stark warning.
The US appears to be losing the crypto battle as Hong Kong opens the market to ETFs
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ETFs could “completely destroy” Bitcoin.
In a December 22 blog post, Hayes, also a Bitcoin celebrity, explains bullexpresses that he sees an additional problem with a successful launch of Bitcoin spot ETFs.
He explains that BTC has value because it “moves” on the blockchain. According to Hayes, spot Bitcoin ETFs go against this value proposition because they would slow down the flow of coins. Spot Bitcoin ETFs were created to “soak up assets” and “store them in a metaphorical vault,” writes Hayes.
According to him, a major ETF success could cause the number of transactions on the blockchain to dry up. He said the following about this:
“BlackRock, the largest fund manager in the world, is playing the game of accumulation. They vacuum up assets, put them in a vault, issue a tradable share, and then collect a management fee for their “hard” work. They are not using the assets they hold for customers, which is a problem for Bitcoin if we take this to the extreme in the future.”
The end result, Hayes said, is that miners will shut down their machines “because they can no longer pay for the energy that powers them.” In this dire scenario, he believes Bitcoin could be “completely destroyed.” Finally, miners are a crucial link within the ecosystem, securing the network with large amounts of computing power.
Too low BTC reward for miners
For adding a new transaction block to the chain, miners receive both a Block reward since all transaction costs have been paid. Every 4 years the block reward will be halved with the Bitcoin halving and by the year 2140 it will have fallen to 0.
Starting this year, transaction costs will be crucial to miners’ survival. According to Hayes, this could pose a problem if institutional parties manage large amounts of Bitcoin through ETFs.
To what extent such a future will actually unfold is of course a big question mark. The crypto world is currently optimistically waiting for a decision from the USA Securities and Exchange Commission (SEC), which is expected to approve several applications on January 8, 9 or 10, according to analysts.
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