Hayes fears that most institutional entities are effectively controlled by governments, who will have to dance to the tune of the state when needed.
Crypto expert Arthur Hayes is seeing the bad side of a potential spot Bitcoin exchange-traded fund (ETF) approval and has issued a warning to anyone that it may concern. Presently, the crypto community is abuzz with excitement about a soon-to-be approval following reports about the same. That is because an ETF approval is expected to not only bring more institutional involvement to crypto but also send BTC prices through the roof and bring good fortunes to crypto in general.
However, Hayes believes that institutional interest in Bitcoin could “herald a situation that we might not actually like in the end.”
Arthur Hayes Expresses Concern Over Institutional Interest in Bitcoin
In a recent podcast, Hayes explained that his thoughts are based on the possibility of these institutional entities launching Bitcoin mining ETFs. Hayes made an example of asset manager BlackRock, which according to him, “is the largest shareholder of some of the largest mining operations.”
With that kind of mining power, Hayes believes that entities such as BlackRock would take up a large percentage of the freely traded Bitcoin (BTC) in circulation. But it doesn’t end there.
Hayes fears that most institutional entities are effectively controlled by governments, who will have to dance to the tune of the state when needed.
For instance, the state may need its citizens to “sit in the fiat banking system” so that it can tax them via inflation to pay back unending debts. At this point, BlackRock and others would have to hold money in an ETF vehicle. And, justifiably so, given that they are, by nature, already compliant with the state.
At this point, Hayes claims that Bitcoin may become useless. He said:
“You can’t actually use the bitcoin. It’s a financial asset. It’s not the actual bitcoin itself.”
Furthermore, Hayes explained it as having some fiat and using it to buy derivatives. Whereas, the asset manager goes and buys some Bitcoin and then puts it in a custodian where it sits. He concluded by saying:
“If the BlackRock ETF gets too big,” he warns, it could actually kill bitcoin because it’s just a bunch of immovable bitcoin that’s just sitting there.”
Says There Is a Need to Think Futuristic
Hayes also warned that people should not be blinded by the temporary prospects of Bitcoin ending in the custody of one or few institutions. He admits that it certainly does help crypto adoption on a broader scale, and will immediately pump prices. But then, what comes next, he asks?
Hayes advises that Bitcoin enthusiasts look keenly at the chances that these institutions may disrupt everything crypto stands for, particularly in the area of encryption and privacy.
He shared that certain upgrades will need to be done on Bitcoin if it is to remain a “rock solid cryptographically hard monetary asset.” However, he also added that the upgrades may not necessarily align with traditional finance institutions, hence his fear that they won’t support him when the time comes.
Hayes remains one of the very few voices that have questioned openly what might happen if most of Bitcoin winds up in the custody of one or few institutions.