The history of the gold market may be repeated with Bitcoin ETFs. How does the traditional financial system truly control Bitcoin?
The price of BTC has started to rise alongside the increase in U.S. long-term Treasury yields, indicating that investors are becoming increasingly skeptical of traditional government bonds and are turning to cryptocurrency assets like BTC.Author: Chloe, PANews
Arthur Hayes, co-founder of BitMEX, recently published an article titled "ETF Wif Hat," which delves into the intricate relationship between traditional finance (TradFi) and the cryptocurrency market (especially Bitcoin), which has returned to a bear market this year.
Hayes compares the elite group at the top of the financial market pyramid with current global financial strategies and historical events, presenting the viewpoint that there are always certain invisible hands manipulating the market, attempting to maintain the operational model of traditional financial structures.
How do the elites of the global financial industry attempt to control Bitcoin?
Hayes: "The elite group that controls the existing financial order in the United States and its affiliates will go to great lengths to maintain the current order of world operations, as they benefit the most from its existence."
The Pax Americana under U.S. governance emphasizes America's responsibility to maintain world peace, which actually refers to America's dominance over the world. This was the main theme of the first U.S. National Security Strategy document released by the Bush administration on September 20, 2002.
By 2008, the global economic crisis triggered by U.S. subprime mortgages had already put the existing financial order, referred to as "American peace" by the U.S. government, in jeopardy.
Major central banks worldwide, including the Federal Reserve (Fed), European Central Bank (ECB), People's Bank of China (PBOC), and Bank of Japan (BOJ), adopted large-scale money printing strategies to alleviate various symptoms of this crisis.
In November 2008, the U.S. began its first round of Quantitative Easing (QE), a monetary policy executed by central banks to inject funds into the market to stimulate the economy. The Fed printed large amounts of money, purchasing bonds in bulk from the market and acquiring lower-quality real estate mortgage-backed securities (MBS) to inject more funds into the market. In total, the Fed released $1.75 trillion during QE1, successfully alleviating the crisis and preventing the market from entering a prolonged recession.
Hayes points out that this approach led to a global debt ratio surpassing the total economic output, reaching unprecedented heights, while interest rates fell to historic lows. At that time, nearly $20 trillion in corporate and government bond yields were even negative. "This situation was not beneficial for most people, as they did not have enough assets to convert losses from these policies into profits."
Amid this intertwining of moral, political, and economic issues, Satoshi Nakamoto published the Bitcoin white paper, and Bitcoin emerged. This document proposed an innovative peer-to-peer system through which people could conduct monetary transactions using network-connected devices and cryptographic technology, without relying on the state, marking the first time in human history.
This system provided an independent financial system for anyone with an internet-connected device, allowing individuals to no longer depend on traditional financial systems and offering a way for those who had experienced financial storms to escape an environment of continuously depreciating global fiat currencies.
But has reality developed as we imagined? Unfortunately, Bitcoin was still an immature entity in 2008, unable to serve as a credible alternative. It wasn't until the financial turmoil of 2022, with the collapse of several major banks and Web3 companies, that Bitcoin and other cryptocurrencies demonstrated their resilience. Unlike traditional financial institutions, these digital assets did not require any bailouts to continue operating, as BTC blocks are generated every 10 minutes.
Looking ahead to 2023, the global financial order led by the U.S. clearly cannot continue to tighten monetary policy, such as raising interest rates and reducing liquidity in the market, as doing so would lead the entire system toward bankruptcy due to excessive leverage (i.e., borrowing) and debt accumulation. Continuing to tighten monetary policy could result in the collapse of the entire financial system or a severe crisis, but a peculiar phenomenon has occurred amid this turmoil:
- Rising yields on U.S. long-term government bonds: The yields on U.S. long-term government bonds have begun to rise gradually. An increase in bond yields typically indicates a decrease in investor demand for bonds (as bond prices and yields have an inverse relationship).
- Rebound of Bitcoin and cryptocurrencies: In this environment, the prices of Bitcoin and other cryptocurrencies have started to rebound or rise, as investors seek alternative investment channels to traditional assets (such as government bonds).
- Falling bond prices: Meanwhile, bond prices have begun to decline, which corresponds to the rise in long-term government bond yields.
A notable shift can be observed, as BTC prices have started to rise alongside the increase in U.S. long-term government bond yields, indicating a growing skepticism among investors toward traditional government bonds and a shift toward crypto assets like BTC.
Will the history of the gold market be rewritten on today's Bitcoin?
To counter this shift and keep capital within the traditional financial system, Hayes points out that these elites at the top of the pyramid are now turning to the establishment of highly liquid exchange-traded funds (ETFs) to financialize Bitcoin.
The most obvious historical event is the gold market, where the introduction of ETFs like SPDR GLD by the U.S. Securities and Exchange Commission (SEC) in 2004 made gold trading easier without the need for physical holdings.
In other words, to avoid the liquidation of traditional financial markets, the elites must financialize Bitcoin by creating a highly liquid exchange-traded fund (ETF). This is the same trick they played with the gold market; therefore, the emergence of Bitcoin ETFs will allow the entire traditional financial (TradFi) system to manage Bitcoin investments more easily, keeping capital within the system.
Thus, BlackRock officially applied for a Bitcoin ETF in June 2023. BlackRock is one of many companies hoping to gain approval for a spot Bitcoin ETF in the U.S. However, in 2023, the SEC finally accepted this application. In contrast, the Winklevoss twins' application for a spot Bitcoin ETF was rejected by the SEC for over a decade since 2013. Today's BlackRock submitted its application and received approval in just six months.
Ultimately, this group of financial elites is integrating Bitcoin into the traditional financial system at a critical moment, which is today's financial market. As various fund management companies begin to utilize their vast decentralized networks, the overall trading volume in the market will only increase.
In the future, fund managers are more likely to find a new path out of the low-return cycle of bonds by investing in Bitcoin amid a globally persistent inflationary environment.
