As a seasoned researcher with a knack for deciphering financial nuances, I find myself deeply resonating with Arthur Hayes’ insights into the complex dynamics of traditional finance (TradFi) and cryptocurrencies. His unique perspective, honed through his experiences as a co-founder of BitMEX, offers a compelling argument about the role of Bitcoin in the context of global monetary policies.
Arthur Hayes, one of the founders of the digital currency exchange BitMEX, contends that Bitcoin functions as a safety valve, allowing governments to manage inflation in conventional financial systems by controlling market instability artificially to an unnatural extent.
In an essay titled Volatility Supercycle, Hayes discussed how politicians printing money to create a calm economic surface triggers volatility in crypto and pushes the value of digital assets to new highs.
Suppressing Volatility in TradFi
Hayes expressed that policymakers find it challenging to manage fluctuations in financial markets due to the excessive level of debt within the system. The American businessman has consistently believed that the Federal Reserve (Fed) increases the money supply when crisis strikes, a response he attributes to the unwillingness of authorities to acknowledge their uncertainty about future events.
According to Hayes, just as keeping a ball submerged underwater takes more effort the deeper it goes, he believes that the quantity of money needed annually to preserve the current level of market volatility grows exponentially. At this pace, the sum of money to be printed from now until the anticipated financial system reset will surpass the total amount ever printed since 1971.
Hayes argues that the distortions in volatility within conventional financial systems are substantial globally, yet significantly more pronounced in the Pax Americana context due to the significance of the U.S. bond market, which serves as the foundation for the dollar (USD), the global reserve currency. Countries prioritize managing the volatility of their own currencies relative to the USD since it influences their capacity to engage in international trade.
Positive Effects on Bitcoin
Ever since the 2008 financial crisis, bank credit has consistently remained at a high level that hasn’t completely depleted. Hayes stated this fiat credit couldn’t be withdrawn as doing so would risk causing the entire financial system to crumble under its mass. Additionally, banks have been compelled to generate even more credit to dampen market fluctuations.
After the Federal Reserve’s recent interest rate decrease, American banks may increase lending, making it easier for borrowers. This increased credit could lead to an influx of fiat currency, some of which might flow into cryptocurrency markets, potentially boosting crypto asset values over the next few months.
Hayes emphasized that every investor’s objective ought to be finding the lowest possible price for Bitcoin (BTC), as the fluctuation between Bitcoin and traditional currency offers a valuable opportunity, not a risk.
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2024-09-27 07:32