Higher times for Bitcoin may lie ahead because the co-founder of BitMEX feels that the present geopolitical tensions within the Middle East may only push the cryptocurrency to rise higher. In line with Arthur Hayes, the results of war would resonate intensely within the US economy in the shape of increased government spending and inflationary levels of monetary policy.
Hayes believes more borrowing will ensue with increasing military spending and that this borrowing will probably be serviced by more balance sheet expansion by the Federal Reserve and industrial banks, all ultimately to the detriment of the US dollar.
Hayes is quick to notice that in times when traditional fiat currencies are weakening, Bitcoin stands to achieve since it acts as a hedge against inflation. The recent increase of the US Producer Price Index to 1.8% over market expectations resonates against inflation concerns and goes in favor of the investors looking for safety from declining fiat money.
Arthur Hayes. Image: Jackie Robinson Foundation
The War’s Impact On Bitcoin & Monetary Policy
Hayes draws on history to support his hypothesis, saying US intervention in wars tends to guide to money printing, which might profit Bitcoin’s price. He then continues to state that there may be an analogy to be drawn between the ’73 energy crisis and the way gold behaved as a tough asset at growing inflationary levels. Hayes says Bitcoin, often dubbed “digital gold,” can soar significantly due to inflationary forces and money printing stemming from war-time expenditures.
BTCUSD trading at $67,199 on the each day chart: TradingView.com
He also highlights the likelihood of upper energy prices if Middle East conflicts turn more deadly, especially if there are strikes and even moderate damage to crucial infrastructure reminiscent of oil fields or other key facilities. On this scenario, inflation would worsen and are likely to drive up demand for Bitcoin as a “stored energy” form within the financial markets. Hayes, naturally enough, cautions that if more macro-level instability takes hold, it’s going to also cause market volatility.
Strategic Considerations For Investors
While he’s optimistic about Bitcoin, he cautions and manages his risk prudently as he has been pulling his exposure on the smaller cryptocurrencies, hoping this can minimize losses when geopolitical tensions rage uncontrolled.
He indicates that debt-financed, spending-friendly policies is not going to only proceed funding long-term growth in Bitcoin but may also proceed the historical trend exhibited throughout history. He notes that if Bitcoin can outpace the Federal Reserve balance sheet growth along historical time frames, it does the job of a hedge against weakening fiat currencies.
Hayes is cautious about impulsive trading on account of political news: “You have to preserve yourself and your capital.” People should invest capital in a store of value like Bitcoin, saving from the debasement of currency and buying power during uncertain times. As geopolitical instability continues, Bitcoin continues to be in a very good position for further growth.
Featured image from DALL-E, chart from TradingView