BitMEX Founder Arthur Hayes Reveals Why Bitcoin ETFs Are a Trap for Crypto Investors
The cryptocurrency world is buzzing with excitement over the recent approval of several Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC). These ETFs allow investors to gain exposure to the price movements of Bitcoin without having to buy, store, or secure the digital asset themselves. However, not everyone is convinced that this is a positive development for the crypto industry. In fact, some prominent figures, such as Arthur Hayes, the co-founder and former CEO of BitMEX, a leading crypto derivatives exchange, have warned that Bitcoin ETFs could pose a threat to the original vision and purpose of Bitcoin.
In his latest blog post, titled “ETF Wif Hat”, Hayes shares his insights and opinions on the implications of Bitcoin ETFs for the crypto market and the global financial system. He argues that Bitcoin ETFs are not a true representation of Bitcoin, but rather a trading product that serves the interests of the traditional finance (TradFi) system. He also cautions that Bitcoin ETFs could undermine the resilience and independence of the crypto ecosystem, especially in times of crisis and turmoil.
Hayes begins his post by recalling the aftermath of the 2008 global financial crisis (GFC), which he says was the catalyst for the creation of Bitcoin. He claims that Bitcoin was designed to offer a credible alternative to the fiat-based monetary system, which he believes is unsustainable and prone to manipulation and inflation. He says that Bitcoin and the crypto markets in general had to grow in terms of number of users and prove that they could weather a severe crisis, which they did in 2020, when the COVID-19 pandemic triggered a global economic meltdown.
However, Hayes warns that the approval of Bitcoin ETFs could change the dynamics of the crypto market and make it more vulnerable to the influence and interference of the TradFi system. He explains that Bitcoin ETFs are based on Bitcoin futures contracts, which are traded on regulated exchanges that are subject to the rules and regulations of the SEC and other authorities. He says that this creates a dependency on the TradFi system, which could compromise the security and sovereignty of Bitcoin.
Hayes also points out that Bitcoin ETFs could have a negative impact on the price and liquidity of Bitcoin. He says that Bitcoin ETFs could create a divergence between the spot price and the futures price of Bitcoin, which could lead to arbitrage opportunities and market inefficiencies. He also says that Bitcoin ETFs could drain the supply and demand of Bitcoin from the crypto market, as investors would prefer to buy and sell the ETFs rather than the actual Bitcoin. He says that this could reduce the liquidity and volatility of Bitcoin, which are essential for its growth and adoption.
Moreover, Hayes warns that Bitcoin ETFs could pose a systemic risk to the global financial system, especially in the context of the ongoing debasement of fiat currencies and the rise of inflation. He says that Bitcoin is outside of the TradFi system and is now exhibiting a negative correlation with bonds, meaning that as bond prices fall and yields rise, Bitcoin prices tend to rise as well. He says that this could attract investors who are looking for a hedge against inflation and a way to escape the fiat system. He says that if bond vigilantes express their dismay with government bonds by selling them and purchasing Bitcoin and other cryptos, the global financial system could collapse.
Hayes concludes his post by urging investors to be wary of Bitcoin ETFs and to understand the difference between a Bitcoin ETF and Bitcoin itself. He says that a Bitcoin ETF is a trading product that is purchased with fiat to earn more fiat. He says that it is not Bitcoin, it is not a path to financial freedom, and it is not outside of the TradFi system. He says that if investors want to escape the fiat system and achieve financial sovereignty, they must buy Bitcoin, withdraw it from the exchange, and self-custody it.
Hayes’s blog post has sparked a lively debate among crypto enthusiasts and experts, who have expressed various views and perspectives on the pros and cons of Bitcoin ETFs. Some agree with Hayes that Bitcoin ETFs are a trap that could dilute the essence and value of Bitcoin, while others disagree and argue that Bitcoin ETFs are a game changer that could boost the adoption and legitimacy of Bitcoin.
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