Relax and thrive in the Bitcoin Bull Market, says Arthur Hayes

According to Arthur Hayes, co-founder of BitMEX, historical economic trends have caused Bitcoin to fall for another big leg in this market cycle.

While bitcoin has traded largely flat over the past several months, Hayes said the leading crypto asset is “going to get its mojo back” thanks to the modern era of US government spending and money printing.

Time of local inflation

A popular crypto essay breaks economic history into two basic periods: local inflation and global inflation. In the year Since 2008, he says, the United States has been in the bottom line since it moved to quantitative easing to stave off the financial crisis.

“During the local period, the authorities pressed thrifts financially to finance past and present wars,” Hayes explained. “In the global era, finance is deregulated, and international trade expands.”

Overall, Hayes said it's wise to hold gold during times of inflation in the area – especially when you lose faith in “the system” and “those who run it.”

However, the beginning of the current economic era was marked by the genetic block of Bitcoin in 2009, which introduced a currency that improved on all the properties of gold. Not only is the currency limited in supply, it “moves at the speed of light” just like digital fiat currencies. “This is why bitcoin has stolen some of the gold's thunder from 2009 to now,” he said.

Too much credit for the recession, says Arthur Hayes.

While the Federal Reserve has raised interest rates and reduced its balance sheet over the past two years, Hayes said the amount of credit in the economy is still expanding in other ways. These have continued to drive up the value of Bitcoin and other assets in defiance of central bank anti-inflationary measures.

“Now you have to carefully monitor the amount of credit created by commercial banks,” he explained. Much of this debt is related to the fiscal deficit, which is financed by government debt that commercial banks “buy at a premium.”

Hayes cited an update from the Congressional Budget Office last month that projected the budget deficit to $1.915 trillion in fiscal year 2024 — the highest level since the Covid-19 era. Meanwhile, the Atlanta Fed projects real US GDP growth to be 2.7% in Q3 2024, allaying fears of a recession in the near term.

“I point this out because I believe fiscal and monetary conditions are loose and will remain loose, and therefore, hodl'ing crypto is the best way to protect wealth,” Hayes said.