Arthur Hayes: Bitcoin Tops Safe Havens in Inflation

Arthur Hayes, the co-founder of BitMEX, has praised Bitcoin as a preferable safe-haven asset in the current economic environment.

Hayes’ most recent blog post explores the historical economic cycles and their implications for the current market environment, contending that we are presently in the midst of a local inflationary cycle.

According to Hayes, this renders Bitcoin a more appealing alternative to gold, as it is not subject to national regulation.

The World is Transitioning from a Unipolar US-Dominated Order

Hayes divides economic cycles into two categories: local and global.

Financial repression is frequently employed by authorities during a local period to finance substantial expenditures, such as wars, which leads to inflation.

In contrast, a global period is defined by the promotion of worldwide trade and the deregulation of finance, which results in deflation.

Hayes contends that the present economic environment is characterized by inflationary pressures and geopolitical tensions, which suggest a local cycle.

According to Hayes, the transition from a unipolar world order dominated by the United States to a multipolar world order dominated by emerging leaders such as China, Brazil, and Russia is one of the primary factors contributing to this inflationary environment.

Inflation becomes a pressing concern as nations prioritize domestic economic stability.

Hayes contends that individuals disillusioned with the system and its governing entities may resort to assets such as gold or Bitcoin, which are not dependent on the state for their existence.

“If you believe in neither the system nor those governing it, you invest in gold or another asset that doesn’t require any vestiges of the state to exist, like Bitcoin.”

Hayes underscores the decentralized nature of Bitcoin and its capacity to effectuate rapid transactions as the primary reasons why it surpasses gold as a safe-haven asset in the current economic environment.

He substantiates his perspective by referencing historical examples, emphasizing the impact of previous economic cycles on investment decisions.

For example, the United States financed conflicts through financial repression during the Pax Americana Ascending Local Cycle from 1933 to 1980, which resulted in a preference for gold as an investment medium.

Conversely, the Pax Americana Hegemon Global Cycle, which spanned from 1980 to 2008, was characterized by a strengthened dollar and deregulation, which favored stock investments over physical gold.

A Key Asset Emerges in the Current Cycle: Bitcoin

Hayes identifies the emergence of Bitcoin as a significant development in the current cycle, which commenced in 2008.

“The issue is that Bitcoin introduced an additional stateless currency at the commencement of the current local cycle,” he stated.

Since its inception, Bitcoin has outperformed gold because it operates through a cryptographic blockchain, enabling quicker and more secure transactions.

Hayes underscores the significance of comprehending these economic cycles to make well-informed investment decisions.

According to analysts from QCP Capital, Bitcoin and Ether have historically performed well in July due to positive seasonality, consistent with Hayes’s optimistic outlook.

A recent note stated that BTC had a median return of 9.6% in July and is known to rebound strongly, particularly after a negative June (-9.85%). This is when considering seasonality.