Bitrabo Editorial
The future might be promising for Bitcoin, as one of BitMEX’s co-founders believes that ongoing geopolitical tensions in the Middle East could propel the cryptocurrency upward. Arthur Hayes suggests that the impact of conflict will reverberate through the US economy, leading to higher government spending and increased inflation.
According to Hayes, military expenditure will result in more borrowing, which will be sustained by an enlargement of the balance sheets of the Federal Reserve and commercial banks, ultimately harming the value of the US dollar.
He points out that during periods when fiat currencies lose value, Bitcoin often thrives, acting as a safeguard against inflation. The recent spike in the US Producer Price Index to 1.8% above predictions heightens inflation worries, benefiting investors looking for refuge from diminishing paper money.
Effects of Conflict on Bitcoin and Financial Policies
Hayes references historical instances where U.S. military actions led to increased money printing, which often supports Bitcoin’s value. He draws parallels between the 1973 energy crisis and gold’s performance during rising inflation, suggesting that Bitcoin, frequently called “digital gold,” could see substantial gains due to inflationary pressures and wartime fiscal activities.
He warns that if conflicts in the Middle East escalate, energy prices could rise, especially if essential infrastructure, like oil refineries, suffers damage. This would intensify inflation, potentially increasing the demand for Bitcoin as a form of “stored energy” in financial markets. However, Hayes also notes that greater economic instability could lead to market fluctuations.
Investor Insights Amidst Uncertainty
While he expresses optimism for Bitcoin, Hayes also stresses the importance of risk management by reducing exposure to lesser-known cryptocurrencies, aiming to mitigate potential losses during heightening geopolitical turmoil.
He emphasizes that policies encouraging debt-funded spending will not only support Bitcoin’s long-term growth but also continue a historical pattern. If Bitcoin can grow faster than the Federal Reserve’s balance sheet over time, it effectively serves as a safeguard against the decline of fiat currencies.
Hayes advises against rash investment decisions driven by political news, stating, “You must preserve yourself and your capital.” He encourages investing in stable assets like Bitcoin to protect against currency depreciation and loss of purchasing power during turbulent times. As geopolitical challenges persist, Bitcoin remains positioned for potential growth.
Image courtesy of DALL-E; chart from TradingView