Arthur Hayes predicted that US debt could push Bitcoin to $1 million

The US has struggled with a growing debt-to-GDP ratio for decades. In the year It took $4 trillion in credit to reduce this ratio from 132 percent to 115 percent in 2008.

According to former BitMEX CEO Arthur Hayes, reducing the ratio to 70% – where it stood in 2008 – would require $10.5 trillion in new credit. This massive credit expansion could have a big impact on asset prices, especially for Bitcoin.

The Bitcoin Scarcity Advantage and the US Debt

When a government creates trillions in new loans, it increases the money supply. This injection of credit, in turn, often triggers inflation, which makes the fiat currency less valuable. As a result, people are looking for alternatives to safely store their wealth.

Hayes argues that the upward trend in the crypto market following Donald Trump's re-election is a good reason, citing Trump's quantitative easing (QE) policies. QE refers to monetary policy in which a central bank buys a certain amount of government bonds to stimulate the economy by increasing the money supply. When central banks inject liquidity, it causes investors to chase higher profits in alternative assets, which causes the price of Bitcoin to increase.

Bitcoin, with a fixed supply of 21 million coins, is in stark contrast to fiat currency. Unlike the dollar, no entity can create more bitcoins, making it a popular hedge against inflation. Arthur Hayes believes that with every dollar that America injects into the economy, Bitcoin will become a more attractive option.

For assets like Bitcoin, prices are set ‘on the margin'. When few coins are available, even a small increase in demand can increase the price significantly. As more fiat money enters the economy, demand for fixed-supply assets grows.

“As the supply of freely tradable bitcoin dwindles, the best money in history will be chasing safe havens, not just from Americans, but from China, Japan and Western Europeans. Stay long and stay long,” Hayes said.

This debt-financed model reflects aspects of China's approach to economic growth. For years, China has embraced state-run capitalism with heavy government intervention. Hayes calls this approach in America “American capitalism with Chinese characteristics.” Following a similar model, the US could use debt-financed spending as a permanent economic tool.

This strategy creates a continuous cycle. More debt means more inflation, which leads to more demand for assets like Bitcoin. Arthur Hayes believes this feedback loop could drive Bitcoin's value higher, perhaps to $1 million per coin.

If these predictions hold, Bitcoin could experience a historic price increase. As trillions flood the economy, Bitcoin's steady supply may make it the last safe haven.