Institutional Interests and Custody Can Kill Bitcoin – Arthur Hayes

• Arthur Hayes warns that institutional custody may turn Bitcoin from a financial freedom tool to an institutional asset, contradicting its decentralized ethos.
• Institutional interests, like potential Bitcoin ETF approvals, could lead to hoarding, making Bitcoin a stagnant asset rather than a circulating currency.
• Despite the bullish market sentiment fueled by institutional interest, Hayes’ narrative urges investors to consider the long-term implications on BTC’s essence.

As Bitcoin continues to thrive, reaching new yearly highs and increasing mainstream usage, Arthur Hayes, the former CEO of BitMEX, expressed fear that Bitcoin’s defining character could be stifled.

Hayes’ speech illuminates a scenario in which institutional custody of Bitcoin might transform it from a tool of financial independence to an institutionalized asset, derailing its initial promise.

The Real Bitcoin Killer: Institutional Interest

Since its creation, the idea of Bitcoin has been decentralization, a financial system that runs without any centralized authority. It contrasts sharply with traditional financial institutions, which Hayes described as statist money “that is here for us, the people.” However, institutional interest, particularly the prospective approval of spot Bitcoin ETFs (exchange-traded funds), could be a double-edged sword.

In a recent conversation, Hayes spelled out a fairly bleak prospect. He pondered on the ramifications of traditional financial magnates such as BlackRock CEO Larry Fink and his ilk snatching up a substantial percentage of the freely circulated Bitcoin. This approach has the potential to turn Bitcoin from a financial independence weapon into simply another asset under institutional control.

The main source of concern is how these institutional behemoths might gain control of Bitcoin, affecting its fundamental use case. Hayes pointed out that if companies like BlackRock and Fidelity enter the war by offering Bitcoin mining ETFs, they will be acting as “agents of the state,” which is a direct contradiction to what Bitcoin stands for.

According to Hayes, the state’s goal of keeping citizens within the fiat banking system for taxation purposes may have found a new friend in these institutional institutions. If these institutions store Bitcoin in ETFs, the fundamental premise of Bitcoin – that it is a decentralized, usable currency – is destroyed.

““You can’t actually use Bitcoin. It’s a financial asset. It’s not the actual Bitcoin itself,” Hayes noted.

Furthermore, Hayes warned that if a company like BlackRock’s ETF becomes too powerful, it might “kill Bitcoin.” Instead of being a circulating money, the hoarded Bitcoin would become a stationary asset. This, he claimed, is equivalent to exchanging “a sugar high today for calamity tomorrow.”

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Nonetheless, Institutional Capital Will Power the Bull Run

Hayes’ fundamental thesis is that Bitcoin’s core strength is its decentralized character. It allows for financial inclusion and independence. However, institutional adoption, particularly the likely approval of spot Bitcoin ETFs, may signal the beginning of Bitcoin’s demise.

In contrast, the infusion of institutional investment unquestionably boosts the crypto market’s optimistic sentiment. Given past tendencies, Rachel Lin, CEO of DEX SynFuture, believes Bitcoin might reach around $50,000 by the end of the month.

“Last week has cemented October’s reputation as ‘Uptober,’ with Bitcoin witnessing nearly a 29% increase in value. Even more interesting is that when we look at historical data, November tends to be even better than October, with an average return of over 35% in Bitcoin. If this November were to deliver similar returns, we could see BTC reach around $47,000,” Lin said.

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