The history of the gold market may be repeated on Bitcoin ETFs. How can the traditional financial system really control Bitcoin?

BTC price is starting to rise alongside a rise in long-term U.S. Treasury yields, signaling growing investor skepticism of traditional government bonds and a shift toward cryptocurrency assets like BTC.

Written by: Chloe, PANews

Arthur Hayes, co-founder of BitMEX, recently published an article in “ETF Wif Hat”, which deeply explored the intricate relationship between traditional finance (TradFi) and cryptocurrencies (especially Bitcoin) that have returned to the bear market this year.

Hayes compared the elite group at the top of the financial market pyramid with current global financial strategies and historical events, and proposed a point: there will always be some invisible hands manipulating the market, trying to maintain the operating mode of the traditional financial structure.

How are the elites of the global financial industry trying to control Bitcoin?

Hayes: “The elite group in charge of the existing financial order in the United States and their vassals will protect the current order in which the world operates at all costs because they benefit the most from the existence of this order.”

Pax Americana emphasizes the United States’ responsibility to maintain world peace, which actually refers to the United States’ domination of the world. On September 20, 2002, the Bush administration released its first “U.S. National Security Strategy” File" in which the main axis.

Until the 2008 global economic crisis caused by U.S. subprime mortgages, the existing financial order under what the U.S. government called “Pax America” was already in danger.

Major 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 adopted large-scale money printing strategies to alleviate this crisis. Various symptoms of crisis.

In November 2008, the United States began its first wave of quantitative easing (QE) (a monetary policy implemented by the central bank to inject funds into the market with the purpose of stimulating the economy). The Federal Reserve printed a large amount of money, purchased a large amount of bonds from the market, and purchased higher-quality bank loans. Bad real estate mortgage-backed securities (Mortgage Backed Security, referred to as MBS), injecting more funds into the market. Throughout QE1, the Fed spent a total of US$1.75 trillion, finally successfully easing the crisis and preventing the market from entering a long-term recession.

Hayes pointed out that at that time, this approach caused the proportion of global debt to exceed the proportion of the total economy to an unprecedented height, and interest rates also fell to historical lows. At that time, nearly $20 trillion in corporate and government bonds were yielding negative amounts. “This situation is of little benefit to most people because they do not have sufficient assets to convert losses into profits from these policies.”

In such a period of intertwined moral, political and economic problems, Satoshi Nakamoto published the “Bitcoin White Paper” and Bitcoin appeared. The document proposes an innovative peer-to-peer system through which people can use network-connected devices and encryption technology to conduct monetary transactions without relying on the state, for the first time in human history.

This system provides an independent financial system for anyone with an Internet-connected device, so that everyone is no longer dependent on the traditional financial system, allowing people who have experienced financial turmoil to find a way to escape the constant depreciation of global legal currencies. ways to escape from the environment.

But does reality develop as we imagine? Unfortunately, Bitcoin was still immature in 2008 and could not serve as a credible alternative. It was not until the financial turmoil of 2022, with the collapse of several major banks and Web3 companies in the market, that Bitcoin and other cryptocurrencies demonstrated their resilience. Unlike traditional financial institutions, these digital assets do not require any bailout but can continue to operate because BTC blocks are generated every 10 minutes.

Looking ahead to last year in 2023, it is clear that the global financial order led by the United States is still unable to continue to tighten monetary policy, such as raising interest rates and reducing liquidity in the market, because doing so will lead to the bankruptcy of the entire system due to leverage (that is, borrowing) and debt The accumulation is too high. If monetary policy continues to be tightened, it may lead to the collapse of the entire financial system or a serious crisis. However, a special phenomenon occurs during this storm:

• U.S. long-term Treasury yields rise: Long-term U.S. Treasury yields have begun to gradually rise. A rise in Treasury yields generally means less investor demand for bonds (since bond prices have an inverse relationship with yields). *Bitcoin and Cryptocurrency Rally: In this environment, the price of Bitcoin and other cryptocurrencies began to rebound or rise. As investors seek alternatives to traditional assets such as government bonds.
• Bond prices fell: At the same time, bond prices began to fall, which corresponded with a rise in long-term Treasury yields.

One particular shift can be seen as BTC prices begin to rise in line with rising long-term U.S. Treasury yields, signaling growing investor skepticism of traditional government bonds and a shift toward crypto assets such as BTC.

Will the history of the gold market be rewritten on Bitcoin today?

In order to combat this shift and keep capital in the traditional financial system, Hayes pointed out that these elite groups at the top of the pyramid are now turning to financializing Bitcoin by establishing highly liquid exchange-traded funds (ETFs). .

The most obvious historical event is the original gold market. ETFs such as SPDR GLD introduced by the US Securities and Exchange Commission (SEC) in 2004 made gold trading easier without the need for physical holdings.

In other words, in order to avoid the liquidation of traditional financial markets, elites must financialize Bitcoin by creating a highly liquid exchange-traded fund (ETF). This is the same trick they played on the gold market. Therefore, the emergence of Bitcoin ETFs will make it easier for the entire traditional financial (TradFi) system to manage Bitcoin investments and keep capital within the system.

Therefore, BlackRock officially applied for a Bitcoin ETF in June 2023. Blackrock is among a number of companies hoping to gain approval for a spot Bitcoin ETF in the United States. However, in 2023, the SEC finally accepted the application. But when the Winklevoss twins applied for a spot Bitcoin ETF in 2013, the U.S. Securities and Exchange Commission rejected their application for more than a decade. BlackRock today applied and was approved in just six months.

This last group of financial elites is integrating Bitcoin into the traditional financial system at a critical moment, which is today’s financial market. And as fund management companies begin to activate their vast decentralized networks, the overall market trading volume will only increase.

In the future, fund managers are expected to find a new path out of the cycle of low bond returns by investing in Bitcoin in an environment of continued global inflation.