The co-founder of embattled crypto exchange platform BitMEX warns that extreme HODLing could lead to the complete destruction of Bitcoin (BTC).
In a new blog post, Arthur Hayes notes that Bitcoin’s gargantuan price gains over the past decade have led to culture of HODLing which is the act of holding onto a coin for the long term instead of selling it.
However, the BitMEX co-founder notes that Bitcoin, unlike gold, needs to be used to have value, since miners spend energy to maintain the BTC network.
“To cover their costs, miners must receive payment in a token that is socially valuable. Bitcoin therefore must move, and movement between parties is the antithesis of HODL culture. HODL culture taken to its f(x): maxima would result in the complete destruction of Bitcoin.
Once all Bitcoin has been minted and miners no longer receive sufficient income from network rewards in the form of newly minted Bitcoin, they must rely on transaction fees instead. If no Bitcoin changes hands because we all sit smugly clutching our USB sticks, then there will be no hashpower supporting the network. No network… no value.”
In order to avoid this scenario, Hayes says policymakers need to develop a regulatory environment that “promotes a farm-to-table Bitcoin economy.”
In March, Hayes and fellow BitMEX co-founders Benjamin Delo and Samuel Reed plead guilty to breaking a law that requires financial institutions to help the government detect and counter money laundering schemes.
The U.S. Department of Justice (DOJ) alleged that the trio willfully failed to maintain anti-money laundering protocols and profited from the transactions of US-based customers despite claiming that BitMEX did not serve individuals in the US.
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