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Bitcoin ETFs could attract billions from TradFi, says BitMEX founder Arthur Hayes

Despite potential challenges, Hayes expects the crypto market to reach its previous peak by the end of the year.

Bitcoin ETFs could attract billions from TradFi

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A successful spot Bitcoin ETF could lead to a major capital shift, with billions of dollars potentially moving from the TradFi market to crypto, predicts BitMEX founder Arthur Hayes in his recent blog post.

Hayes points to the global nature of the Bitcoin market. Currently, price discovery for Bitcoin happens primarily on Eastern exchanges like Binance and OKX. However, the new spot Bitcoin ETFs don’t trade on these exchanges, potentially creating arbitrage opportunities on less liquid Western exchanges.

“For the first time in a long time, the Bitcoin markets will have a predictable and long-lasting arbitrage opportunity. Hopefully, billions of dollars of flow will be concentrated in an hour-long period on exchanges that are less-liquid and price followers of their larger Eastern competitors.”

Hayes also highlighted the role of Hong Kong and its upcoming ETF products. He predicts these products will likely trade on regulated crypto exchanges within Hong Kong, such as Binance and OKX, or new exchanges catering to the region’s specific needs.

The impact of these developments on fund managers in cities like New York and Hong Kong is significant. According to Hayes, these financial hubs may not offer the best Bitcoin prices, but they will restrict trading to select exchanges. This limitation, he believes, will create market inefficiencies ripe for exploitation by savvy arbitrageurs.

Hayes suggests that global central banks and governments will print more money, creating conditions that necessitate the return of inflationary policies and fueling another phase of the crypto bull run. Moreover, he believes the ETF space will drive more inflows if inflation persists.

Hayes sees ongoing global changes, including potential geopolitical conflicts, as additional drivers of inflation. With persistent global inflation, traditional bonds may become ineffective in portfolios.

In this scenario, Bitcoin’s low correlation with traditional assets could become an attractive alternative to fund managers, while ETFs offer them an easy way to invest in Bitcoin. These favorable conditions could turn fund managers into Bitcoin ETF markets, potentially unlocking more trading venues as global fund managers expand their networks.

“The Bitcoin Spot ETF complex must trade billions of dollars-worth of shares each day. On Friday January 12th, the daily total volume reached $3.1 billion. This is very encouraging and as the various fund managers start activating their vast global distribution network, trading volumes will only increase,” Hayes expressed optimism.

While Hayes expects price fluctuations, he remains confident that the entire crypto market will reach or exceed its previous peaks by year’s end.

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