Institutional custody of bitcoin could kill it, cautions Hayes

Hayes says bitcoin is the antithesis of statist money “that is here for us, the people”

article-image

Valery Evlakhov/Shutterstock modified by Blockworks

share

Potential spot bitcoin ETF approval excitement is building in the crypto ecosystem, but Arthur Hayes isn’t convinced such an event is good for bitcoin, or for the people who use it.

The crypto OG and Maelstrom Fund founder says institutional interest in bitcoin could “herald a situation that we might not actually like in the end.”

Speaking to Blockworks on the On the Margin podcast (Spotify/Apple), Hayes posits a hypothetical scenario: “Let’s say Larry Fink and his [traditional finance] ilk come in and hoover up a large percentage of the freely traded bitcoin [BTC] in circulation.”

The same institutional entities could launch bitcoin mining ETFs, he says, adding that “BlackRock is the largest shareholder of some of the largest mining operations.”

Asset managers like BlackRock are effectively “agents of the state,” Hayes cautions. “They act on what the state tells them to do.”

Hayes argues that if the state needs its citizens to “sit in the fiat banking system” in order to tax them via inflation to pay back ever-growing debts, it makes sense for institutional entities — who are, by nature, compliant with the state — to hold money in an ETF vehicle.

In such a system, Hayes argues, “You can’t actually use the bitcoin. It’s a financial asset. It’s not the actual bitcoin itself.” 

“You had some fiat, you bought this derivative,” he explains. “The asset manager went and bought some bitcoin and they put it in a custodian and it sits there.” 

“If the BlackRock ETF gets too big,” he warns, “it could actually kill bitcoin because it’s just a bunch of immovable bitcoin that’s just sitting there.” 

Trading a sugar high today for calamity tomorrow?

Additionally, Hayes warns that the same entities could increase their grip on the network’s consensus mechanics by holding a large percentage of miners. 

Certain upgrades that might be required to ensure bitcoin remains a “rock solid cryptographically hard monetary asset” — particularly regarding encryption and privacy — are not necessarily aligned with traditional finance institutions, he says. 

Read more: DeFi is facing a ‘full frontal assault’ from regulators

“So would they support that?” he asks. “Open question. I don’t know, but that’s what happens when you have these large passive investors.”

Hayes says bitcoin is the antithesis of statist money “that is here for us, the people, that have the ability to send money around the world.” But he wonders aloud what might happen if most of it winds up in the custody of one or few institutions.

Of course, broader adoption of bitcoin will undoubtedly be great for the price in fiat terms, Hayes says. “But is it actually gonna be great for the usefulness of bitcoin?”

“Are we, you know, gaining a sugar high today to only engender a massive calamity in the future? I don’t know.”

Hayes says people need to think longer term about the issue. “Yes, okay, ETF comes, price pumps to whatever it pumps to — but what’s the net result of one institution holding all this crypto?”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates (19).png

Research

Suilend has grown into the top money market and liquid staking provider on Sui. STEAMM, Suilend’s Superfluid AMM, presents a compelling avenue for growing market share within Sui’s DEX landscape and revenue generation for the protocol. Suilend’s multi-product suite position it well for owning market share across key verticals. While current metrics across the Sui ecosystem are likely inflated due to Sui Foundation incentive programs, SEND trades at amongst the lowest multiples in the lend/borrow sector, suggesting that a bull case for continued growth in the ecosystem may be mispriced.

article-image

Decentralized money was a “very unpopular goal” when concepts were proposed in the ’90s, said Nick Szabo

article-image

Cove aims to deliver “risk-adjusted yield” through curated DeFi vaults

article-image

The best capital markets are open to the most people — and crypto capital markets are open to everyone

article-image

Post-conference musings on Firedancer, Kraken, Solana Mobile and Trump

article-image

Executives expect others to follow SharpLink Gaming’s lead in purchasing an asset that has surged this past month

article-image

After a weekend of tariff policy shifts, investors appear confident that trade deals are underway