In a stark analysis, BitMex founder Arthur Hayes unveils the seismic impact of the imminent approval of a Bitcoin Exchange Traded Fund (ETF). Tracing the roots of Bitcoin’s emergence as a financial lifeline outside traditional systems, Hayes navigates through the financial crises of the past, highlighting Bitcoin’s resilience in the face of adversity.
Bitcoin’s Emergence: A Response to Global Debasement
In a sobering reflection on the fragility of traditional financial systems, BitMex founder Arthur Hayes sheds light on the imminent approval of a Bitcoin Exchange Traded Fund (ETF) and its profound implications. The journey begins with a stark reminder that most of the world’s population remains excluded from benefiting from global fiat monetary systems.
Hayes describes the historical backdrop where inflation wreaked havoc globally, citing examples like the Arab Spring and the stark increase in the price of an avocado toast. He acknowledges gold as a traditional refuge but highlights its impracticality. Bitcoin, he notes, emerged as a solution to separate money from the state, offering a globally scalable alternative for the first time in human history.
Bitcoin’s Maturation Crucible of 2022
Fast forward to 2022, and the crypto markets faced a crucible as central banks globally tightened financial conditions. Hayes points out the vulnerabilities of traditional financial institutions, highlighting the insolvency of some US banks and the need for a stealthy bailout, the Bank Term Funding Program (BTFP).
Unlike centralized counterparts that succumbed to the challenges of rising interest rates, Hayes emphasizes that Bitcoin and crypto weathered the storm without a bailout. Over-leveraged positions were liquidated, prices fell, but the decentralized nature of crypto prevailed.
The Changing Relationship with Bonds
2023 marked a turning point as Bitcoin’s relationship with rising yields changed. Traditionally, Bitcoin mirrored other long-duration assets, falling when interest rates rose. However, after the BTFP, Bitcoin’s rise alongside yields indicated a loss of faith in the traditional financial system.
Hayes introduces the dilemma faced by traditional finance (TradFi) – the need to keep capital within the system to avoid recognizing inherent losses. The proposed solution: a highly liquid Bitcoin ETF. He parallels this strategy with the financialization of gold through ETFs in the past.
The Unusual Timing of ETF Approval
As Arthur Hayes points out, the approval of a Spot Bitcoin ETF becomes particularly intriguing given the timing. The US SEC, historically resistant, seems open to the idea, with Blackrock gaining approval within six months of application. Hayes invites readers to ponder the motivations behind this shift.
In concluding his analysis, Hayes emphasizes the significance of understanding that a Spot Bitcoin ETF is a trading product, not a path to financial freedom outside traditional finance. As the ETF landscape evolves, the global financial system faces a paradigm shift, and users are urged to consider self-custody for true financial autonomy. Hayes’ opinion is that the ETF approvals were premised on the need to keep funds from leaving the traditional finance system. However, according to him, the path of financial freedom is in owning bitcoins and not just investing in ETFs.