Better times may be ahead for bitcoin as BitMEX co-founder feels the current geopolitical situation tensions in the Middle East it can only push the cryptocurrency higher. According to Arthur Hayes, the effects of the war would resonate strongly in the American economy in the form of increased government spending and inflationary levels of monetary policy.
Hayes believes that further borrowing will occur as military spending increases and that this borrowing will be met by further balance sheet expansion by the Federal Reserve and commercial banks, all ultimately to the detriment of the US dollar.
Hayes is quick to point out that in times when traditional fiat currencies are weakening, bitcoin/” rel=”nofollow noopener” target=”_blank”>bitcoin can gain because it acts as a hedge against inflation. The recent rise in the US producer price index to 1.8% above market expectations resonates against inflation concerns and favors investors seeking safety from declining fiat money.
Arthur Hayes. Image: Jackie Robinson Foundation
The impact of war on bitcoin and monetary policy
Hayes draws on history to support his hypothesis, saying that US intervention in wars tends to lead to money printing, which can benefit the price of bitcoin. He then goes on to state that an analogy can be drawn between the energy crisis of '73 and how gold behaved as a hard asset at rising inflationary levels. Hayes says that bitcoin, often referred to as “digital gold” may skyrocket significantly due to inflationary forces and money printing arising from wartime bills.
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BTCUSD trading at $67,199 on the daily chart: TradingView.com
It also highlights the likelihood that energy prices will rise if Middle East conflicts They become more deadly, especially if there are strikes or even moderate damage to crucial infrastructure such as oil fields or other key facilities. In this scenario, inflation would worsen and tend to increase demand for bitcoin as a form of “stored energy” in financial markets. Hayes, naturally, warns that if further instability takes hold at the macro level, it will also lead to market volatility.
Strategic considerations for investors
While he is bullish on bitcoin, he cautions and manages his risk wisely as he has been reducing his exposure to smaller cryptocurrencies, hoping this will minimize losses when geopolitical tensions get out of control.
It indicates that debt-funded spending-friendly policies will not only continue to fund bitcoin's long-term growth, but will also continue the historical trend exhibited throughout history. He notes that if bitcoin can outperform the growth of the Federal Reserve's balance sheet over historical time periods, it serves as a hedge against weakening fiat currencies.
Hayes is wary of impulsive trading due to political news: “You must preserve yourself and your capital.” People should invest capital in a store of value like bitcoin, saving themselves from currency and purchasing power debasement in times of uncertainty. As geopolitical instability continues, bitcoin is still well positioned for further growth.
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