In his latest essay titled “ETF Wif Hat,” Arthur Hayes, the founder of the crypto exchange BitMEX, delved into the intricate relationship between traditional finance (TradFi) and the burgeoning field of cryptocurrencies, specifically Bitcoin. Hayes draws parallels between the current financial strategies of global elites and historical practices, suggesting a continuous pattern of preserving existing financial structures.
How Shadow Elites Are Trying To Control Bitcoin
Hayes begins by comparing the elite’s efforts to preserve the global financial status quo to the exorbitant costs incurred in the last moments of life in healthcare. He argues that since the 2008 global economic crisis, triggered by subprime mortgage loans in the United States, the existing financial order, which he refers to as “Pax Americana,” has been in jeopardy.
He asserts, “The elites in charge of Pax Americana and her vassals are willing to do whatever it takes to preserve the current world order because they have benefited the most from its existence.” Consequently, central banks around the world, including the Federal Reserve (Fed) in the US, the European Central Bank (ECB), the People’s Bank of China (PBOC), and the Bank of Japan (BOJ), resorted to massive money printing efforts to alleviate various symptoms of this crisis.
Hayes points out that this strategy led to an unprecedented global debt-to-GDP ratio and historically low interest rates, with nearly $20 trillion in corporate and government bonds yielding negative returns at their peak. This situation, according to Hayes, did not benefit the majority of the world’s population, who do not own sufficient financial assets to gain from such monetary policies.
In this context, Hayes introduces Bitcoin, created by the pseudonymous Satoshi Nakamoto, as a groundbreaking development offering an alternative to traditional financial systems. He describes Bitcoin’s creation by Satoshi Nakamoto as a moment where “a lotus blooms in a pond of dung,” signaling a new era in financial independence and global scalability.
However, Hayes notes that Bitcoin was initially too immature to serve as a credible alternative following the 2008 crisis. It wasn’t until the financial turmoil of 2022, which included the collapse of several major banks and crypto firms, that Bitcoin and other cryptocurrencies demonstrated their resilience. Unlike traditional financial institutions, these digital assets did not receive bailouts yet continued to operate, with BTC blocks being produced every 10 minutes.
In 2023, according to Hayes, it became evident that traditional financial systems could not sustain further monetary tightening. This led to a curious shift where BTC prices started to rise alongside increasing long-end US Treasury yields, suggesting a growing investor skepticism towards traditional government bonds and a pivot towards assets like Bitcoin and major tech stocks.
The Same Playbook As With Gold?
To counter this shift and keep capital within the traditional system, Hayes argues that the elite are now turning to financialize Bitcoin through the creation of Exchange Traded Funds (ETFs). He draws a parallel to the gold market, where the introduction of ETFs like SPDR GLD by the US Securities and Exchange Commission (SEC) in 2004 allowed for easier trading of gold without the need for physical possession.
“To avoid this reckoning, the elite must financialize Bitcoin by creating a highly liquid Exchange Traded Fund (ETF). This is the same trick they played on the gold market,” Hayes argues. Thus, a Bitcoin ETF, Hayes posits, would enable traditional finance (TradFi) firms to manage Bitcoin investments, keeping the capital within the system. Hayes highlights the significance of Blackrock, a major asset management firm, applying for a Bitcoin ETF in June 2023.
He finds it noteworthy that the SEC, after years of rejecting similar applications, including one from the Winklevoss twins in 2013, seemed receptive to Blackrock’s application, approving it within six months. This, Hayes suggests, indicates a strategic move by the elites to integrate Bitcoin into the traditional financial system at a critical juncture.
However, the BitMEX founder warns that a spot ETF is fundamentally different from owning Bitcoin directly. Hayes warns, “A spot Bitcoin ETF is a trading product. You purchase it with fiat to earn more fiat. It is not Bitcoin. It is not a path to financial freedom. It is not outside of the TradFi system.”
Looking forward, Hayes discusses the market impact of the spot ETF, focusing on the Blackrock ETF due to Blackrock’s global reach and distribution capabilities. He predicts that the crypto ETF complex will continue to gather assets as inflation persists, driven by the ongoing unwinding of the post-WW2 global economic and military arrangement and the inflationary nature of war.
In conclusion, Hayes reflects on the potential of the financialization of Bitcoin by TradFi to initially drive up the price of BTC in fiat terms:
The bull market is just beginning. 2024 will be a choppy year with regards to price action, but I still expect by year-end, we will be at or above an all-time high in the market cap of Bitcoin and the entire crypto complex. In the name of Lord Satoshi, Yahtzee!!!
At press time, BTC traded at $42,822.
Featured image from DALL·E 3, chart from TradingView.com