Arthur Hayes, the co-founder of the notable cryptocurrency exchange BitMEX, has become a voice of significant influence within the crypto community, particularly regarding Bitcoin’s potential trajectory. In his latest essay, “Black or White?”, Hayes makes a provocative prediction: Bitcoin could ascend to the staggering valuation of $1 million. To substantiate his forecast, he delves into U.S. economic policies under a possible second term for Donald Trump, drawing compelling parallels between U.S. economic strategies and those of China. This article will evaluate Hayes’ arguments, dissecting their implications for both the economy and potential investors in the cryptocurrency market.
Hayes presents a unique perspective by coining the phrase “American Capitalism with Chinese Characteristics” to describe the evolving economic landscape of the United States. He posits that the primary goal of the U.S. government is to maintain its grip on power, irrespective of whether economic frameworks resemble capitalism, socialism, or previously unsupported identities like fascism. This assertion raises important questions about the trajectory of U.S. economic policy, suggesting a blend of authoritarian governance and market-driven principles similar to China’s post-Deng Xiaoping reforms.
Hayes argues that the essence of capitalism has been compromised over the last century, citing the establishment of the Federal Reserve in 1913 as a turning point. He poignantly remarks that capitalism traditionally entails that mismanaged enterprises face the repercussions of their failures—a notion that has given way to a more protective and interventionist government approach over the years.
A keen critique Hayes offers is the transition from “trickle-down economics” to direct stimulus measures exemplified by responses during the COVID-19 pandemic. He highlights a divide in stimulus distribution—between “QE for the poor” and “QE for the rich.” Rather than funneling funds solely to large asset holders, recent policies aimed at direct payments to citizens revitalized economic activity, resulting in positive outcomes like decreased national debt-to-GDP ratios.
The crux of Hayes’ argument is that government checks put money directly into the hands of consumers, spurring demand for goods—this, in turn, leads to increased production and overall economic thereby growth. It suggests a possible shift in how economic resilience can be engineered in times of crisis, marking a departure from traditional strategies that primarily benefit the wealthy.
Looking ahead, Hayes is particularly focused on the ramifications of a potential return of Donald Trump to the presidency. He anticipates a suite of expansive policies aimed at re-shoring critical industries, influenced by individuals he believes Trump may appoint to key positions, like Scott Bassett for Treasury Secretary. These potential initiatives, driven by aggressive government spending and supported by increased bank credit, are likely to exert inflationary pressure on the economy.
Hayes warns that such economic tactics could depreciate the value of fiat currency, adversely impacting traditional savers who rely on long-term bonds or savings deposits. In this increasingly unstable financial landscape, he encourages moving investment portfolios toward gold and cryptocurrencies, particularly Bitcoin, which he positions as an antidote to inflationary trends.
Another dimension to Hayes’ analysis is the impact of regulatory changes, such as exemptions from the Supplemental Leverage Ratio (SLR) for banks. Such regulatory leniency would empower banks to acquire substantial government debt with minimal capital reserves—an avenue he denotes as a precursor for limitless quantitative easing (QE).
The implications of these policies could yield a surge in bank credit and, consequently, inflation, fundamentally altering the landscape of asset valuation. Hayes argues that Bitcoin is uniquely positioned to thrive amidst these shifts. Its scarcity—coupled with increasing demand due to fiat currency depreciation—suggests a future where investors may flock to Bitcoin as a safe haven asset.
Hayes backs his bullish outlook on Bitcoin by examining its historical performance in correlation with U.S. bank credit supply. He notes that, when adjusted for bank credit growth, Bitcoin has outperformed traditional asset classes like the S&P 500 and gold. This performance reinforces his assertion that Bitcoin will remain resilient—if not flourish—during periods of economic upheaval driven by aggressive fiscal policies.
Hayes calls for investors to take proactive measures in position themselves for the anticipated macroeconomic shifts. His directive is clear: “Get long, and stay long.” As such, investing in Bitcoin could be viewed not merely as a speculation but as a calculated response to a transforming economic environment, echoing themes reminiscent of historical shifts in global economic power. With Bitcoin trading at approximately $87,660 at press time, one wonders if the road ahead indeed leads toward the ambitious $1 million valuation.
