Bitcoin exchange founder Arthur Hayes has expressed concerns that the pending regulatory approval of a spot Bitcoin exchange-traded fund (ETF) could have negative impacts on the cryptocurrency.
In a blog post on December 22nd, Hayes warned that traditional finance firms like BlackRock dominating the spot Bitcoin ETF market could potentially undermine Bitcoin itself.
The worry is that these massive asset managers could end up holding “all the Bitcoin in circulation” if their ETFs become too successful.
Hayes argues that companies like BlackRock vacuum up assets, store them in a metaphorical vault, issue a tradable security, and charge a management fee for their ‘hard’ work.
They don’t use the things they hold on behalf of their clients, which presents a problem for Bitcoin if we take an extreme view of a possible future, he says.
If the public opts for Bitcoin ETF derivatives instead of buying and holding Bitcoin themselves, Hayes argues this could reduce use of the Bitcoin blockchain over time.
He paints a dire scenario where Bitcoin is merely kept in vaults without being used, leading miners to lose income from transaction fees and potentially causing the death of the network.
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