Update: Bitcoin’s Survival at Risk Due to Institutional Custody - Hayes

Summary

• BitMEX CEO Arthur Hayes has expressed concern about institutional interest in Bitcoin, warning that if entities like BlackRock hold a significant portion of Bitcoin in ETFs, it could undermine its decentralized nature and core principles.
• He questions whether Bitcoin's utility as a decentralized currency would be compromised if powerful institutions gain control over a substantial amount of the cryptocurrency.

Arthur Hayes, BitMEX CEO and founder of Maelstrom Fund, has voiced deep concerns about the impact of institutional interest on Bitcoin's future. He argues that the approval of a spot Bitcoin ETF, which has stirred excitement within the crypto ecosystem, may not necessarily be a boon for the world's most popular cryptocurrency.

Bitcoin's Role as a Decentralized Currency in Jeopardy

Hayes, speaking in a recent podcast with Blockworks, laid out a hypothetical scenario: "Let’s say Larry Fink and his ilk come in and hoover up a large percentage of the freely traded Bitcoin (BTC) in circulation." Institutional entities like BlackRock, he argues, could potentially become major players in Bitcoin by launching Bitcoin mining ETFs. According to Hayes, "BlackRock is the largest shareholder of some of the largest mining operations."

However, Hayes is not optimistic about this prospect, stating that asset managers like BlackRock are essentially "agents of the state" and act in accordance with government directives. He believes that institutional entities, being compliant with the state, may choose to hold Bitcoin in an ETF vehicle, effectively sidelining it as a financial asset rather than a decentralized digital currency that individuals can use for transactions.

Hayes expresses concern that if a BlackRock ETF or similar institutional initiatives gain too much traction, it could immobilize a significant portion of Bitcoin, potentially jeopardizing its core principles. He further warns that these entities could exert greater control over the network's consensus mechanics by amassing a substantial percentage of Bitcoin miners.

Hayes stresses that Bitcoin is supposed to be the antithesis of government-controlled currency and emphasizes its potential for individuals to send money globally. However, he raises questions about what might happen if the majority of Bitcoin ends up in the custody of a few powerful institutions.

While Hayes acknowledges that broader adoption of Bitcoin would likely boost its price in fiat terms, he questions whether this would genuinely benefit the Bitcoin ecosystem in terms of its utility as a decentralized currency. He urges people to think about the long-term implications of one or a few institutions holding significant amounts of Bitcoin.