Arthur Hayes, the founder of crypto exchange BitMEX, believes that the success of the highly anticipated Bitcoin exchange-traded funds (ETFs) will “completely destroy” the leading digital network.
In a recent blog post titled “Expression,” Hayes estimated that Bitcoin could die if all BTC in circulation ended up in the hands of traditional financial asset managers, most of whom compete for ETFs.
Hayes explained that his prediction is based on the difference between Bitcoin and every other monetary instrument humanity has ever used. Monetary assets like gold and fiat exist physically due to natural laws, unlike BTC, which only exists if it moves.
Once Bitcoin reaches block 2140, rewards will become zero and miners will only earn fees for validating transactions. This means that miners can only receive income if the Bitcoin network is used. In a situation where there were no more Bitcoin transactions, miners would no longer be able to bear the energy costs, which would cause their machines to shut down and then the network to die.
Traditional asset managers like BlackRock, which have filed applications with the U.S. Securities and Exchange Commission (SEC) for spot Bitcoin ETFs, are accumulating the leading digital asset in preparation for the product launch. Hayes said they intended to store the bitcoins in a “metaphorical vault”, issue a tradable security and charge a management fee for their services, without being able to use the assets they hold at the name of their customers.
Another state-controlled financial asset
The BitMEX founder envisioned a future in which the largest Western and Chinese asset managers would own all the BTC in circulation. He explained that such a situation would be possible as investors would mistake a financial asset for a store of value, choosing to purchase Bitcoin ETF derivatives instead of BTC itself.
Once a handful of companies own all the BTC, the blockchain will no longer really be used and the coins will never move again. Miners will turn off their machines, Bitcoin will become another state-controlled financial asset and die because it is not used.
On the positive side, the death of Bitcoin could lead to the creation of a new crypto network, which would become a monetary asset not controlled by the state.
“I hope the second time around we learn not to hand over our private keys to the bald guys,” Hayes said.
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