Of the many things that should excite the crypto world in 2024, the potential BlackRock ETF may be at the top of the list. The industry has been I’ve been looking for an ETF for years and several companies have been refused so far.
black rock appears to be in the final stages of his candidacy and many believe it will be a test for approval. This could lead to several benefits for those using crypto and could even trigger a bull run that ushers in a new all-time high price for Bitcoin.
But according to Arthur Hayes, co-founder of BitMEX, this ETF could also have negative consequences which, if left unchecked, could completely destroy Bitcoin.
The disadvantages of ETF
According to Hayes, we need to take into account that companies like BlackRock that launch ETFs specialize in mass asset acquisitions. This ETF will likely see huge demand and to satisfy it, BlackRock will need to buy a lot of Bitcoin. In itself, this seems like a good thing. But at the same time, any Bitcoin expert will tell you that a certain number of tokens must remain in circulation to ensure a healthy ecosystem.
More specifically, there must be enough Bitcoin in circulation to reward users who validate transactions. But if all Bitcoin goes to ETFs run by billionaire companies, there will be fewer, if any, ordinary people to initiate Bitcoin transactions. A lack of transactions means a lack of transaction fees paid to validators. Ultimately, validators will have no motivation to continue and will not even be able to pay network fees. One by one, these validators will turn off their machines and over time, the Bitcoin network will die.
How This Could Affect Bitcoin Users
We don’t know yet if this death of the network will happen, but it must be recognized that large investment companies monopolizing too much of all cryptocurrencies on the market will affect everyone who uses Bitcoin in different ways .
For those who invest in Bitcoin, there is a chance of making colossal profits initially. As companies purchase Bitcoin for their ETFs, the price of Bitcoin is expected to initially increase due to increased scarcity. This means that some traders can potentially sell their tokens to make a massive profit. But this likely won’t last, because once too many tokens are concentrated in ETFs and none are available to pay validators, the tokens held by traders will become essentially worthless.
The Bitcoin ecosystem, as we have established, needs tokens in circulation to stay healthy. It would therefore be in investors’ interests if Hayes’ prediction does not come true.
Then there are people who use Bitcoin for non-investment reasons. Many businesses accept Bitcoin as payment for goods and services, which means that there is a category of Bitcoin users who use the token for domestic payments. They too will be affected if Hayes’ prediction comes true, as the lack of network validators means their transactions cannot be validated.
If Bitcoin transactions cannot be validated, this means that sending and receiving Bitcoin will be more complicated for users. Additionally, Bitcoin users who want to spend their tokens will have to find other alternatives. If, as a consumer, you have found an online casino where you can play with cryptocurrency, for example, you may need to switch to other tokens instead. Fortunately, many online crypto casinos accept multiple cryptos alongside Bitcoin.
And that doesn’t even include those who hold a significant portion of their savings in Bitcoin as a hedge against inflation. Providing some sort of insurance against inflation has been a major selling point of Bitcoin and this is removed in the event of a mass departure of validators.
Ultimately, Bitcoin is not just an investment vehicle but a currency. And at any given time, many people need foreign currency to pay for their daily expenses. Likewise, the destruction of a central bank would render fiat currency worthless and upend people’s lives, much like the collapse of the Bitcoin ecosystem.
What happens next
In a blog post, Arthur Hayes claims that if this happens and we witness the death of Bitcoin in real time, another digital asset will arise and take its place. There are thousands of other tokens on the market and one of them might just become the next big thing in crypto.
Several central bank digital currencies are also expected to launch this year and one of them could offer an alternative to Bitcoin if this prediction comes true.