In his latest article titled "ETF Wif Hat", Arthur Hayes, founder of Crypto asset exchange BitMEX, delves into the intricate relationship between traditional finance and the emerging Crypto asset sector (especially BTC).
Hayes contrasts the financial strategies of the current global elite with historical practices and proposes a sustainable model for maintaining the existing financial structure.
Hayes begins by comparing the efforts of the elite to maintain the global financial status quo to the high costs of health care at the end of life.
He believes that the existing financial order, which he calls "American Pax Americana," has been in jeopardy since the global economic crisis triggered by the US subprime mortgage crisis in 2008.
“The elites who run the existing financial order in the United States and their minions are willing to do whatever it takes to preserve the current world order because they benefit most from its existence,” Hayes asserted.
As a result, central banks around the world, including the U.S. Federal Reserve (Fed), the European Central Bank (ECB), the People’s Bank of China (PBOC), and the Bank of Japan (BOJ), have resorted to massive money printing to mitigate the various problems of this crisis.
Hayes noted that this strategy has led to unprecedented levels of global debt as a percentage of GDP and historically low interest rates, with nearly $20 trillion in corporate and government bonds yielding negative returns at their peak.
Hayes believes that this situation does not benefit most people in the world because they do not have enough financial assets to benefit from this monetary policy.
In this context, Hayes introduced BTC, created by the pseudonym “Satoshi Nakamoto,” as a groundbreaking development that provides an alternative to the traditional financial system.
He described Satoshi Nakamoto’s creation of BTC as a “lotus blossoming in the mud,” marking a new era of financial independence and global scalability.
However, Hayes noted that BTC was initially immature and could not become a reliable alternative after the 2008 crisis. It was not until the financial storm of 2022, including the collapse of several major banks and crypto asset companies, that BTC and other crypto assets showed their resilience.
Unlike traditional financial institutions, these digital assets were not bailed out but continue to operate, with BTC blocks being produced every 10 minutes.
Hayes said that by 2023, it was clear that the traditional financial system could not withstand further monetary tightening. This led to a strange turn of events, in which the price of BTC began to rise along with the rise in long-term U.S. Treasury yields, indicating that investors were becoming increasingly skeptical of traditional government bonds and turning to assets such as BTC and major technology stocks.
He also believes that in response to this shift and to keep capital within the traditional system, the elites are now financializing BTC by creating ETFs.
Hayes draws a parallel to the gold market, where in 2004 the SEC (Securities and Exchange Commission) launched ETFs such as SPDR GLD, making it easier to trade gold without having to physically own it.
To avoid this liquidation, the elites must financialize BTC by creating a highly liquid ETF. This is exactly the same trick they played on the gold market.
Therefore, a BTC ETF will enable traditional financial companies to manage BTC investments, keeping capital within the system. Hayes highlighted the significance of BlackRock, a large asset management company, applying for a BTC ETF in June 2023.
Notably, the SEC, after rejecting similar applications over the years (including one from the Winklevoss brothers in 2013), seemed receptive to BlackRock’s application, approving it within six months.
This shows that the elites have taken strategic moves to integrate BTC into the traditional financial system at a critical moment.
However, Hayes warned that spot ETFs are fundamentally different from owning BTC directly. A spot BTC ETF is a trading product that can be purchased with fiat currency to earn more fiat currency, but it is not BTC and is not a path to financial freedom because it is outside the traditional financial system.
Looking ahead, Hayes discussed the market impact of spot ETFs, focusing on BlackRock ETFs because of BlackRock’s global reach and distribution capabilities.
Hayes predicts that the Crypto ETF complex will continue to accumulate assets as inflation continues, driven by the ongoing unbundling of global economic and military arrangements following World War II and the inflationary nature of the war.
Finally, Hayes reflected on the possibility of traditional finance financializing BTC, arguing that this would initially push up the fiat price of BTC:
“The bull run has just begun, and 2024 will be a turbulent year in terms of price action. But I still expect that by the end of the year, the market capitalization of BTC and the entire Crypto asset complex will reach or exceed its all-time high.”
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