BitMEX founder Arthur Hayes believes that Bitcoin has the potential to outperform bonds, even in times of war. In a recent Medium post, Hayes shared his observations on the net of RRP (Reverse Repo) and TGA (Treasury General Account) as indicators of dollar liquidity in the markets. These factors will guide his decision-making process regarding T-bill sales and Bitcoin purchases, although he acknowledges the need to remain adaptable. As Hayes puts it, “The best-laid plans of mice and men have a tendency to falter.”
Unpredictable Nature of Global Events
Hayes highlights the unpredictable nature of global events and addresses the ultimate wildcard: the price of oil and the ongoing conflict between Hamas and Israel. If Iran becomes involved in the war, disruptions in the oil supply could arise, causing political challenges for the Federal Reserve (Fed) in maintaining a hands-off monetary policy approach. In such a scenario, the Fed may need to counter higher oil prices by raising interest rates. However, a recession resulting from the war and increased energy prices could provide justification for the Fed to lower rates. This uncertainty could trigger an initial sell-off in Bitcoin, but historically, Bitcoin has proven its ability to outperform bonds during times of war. Despite this uncertainty, Hayes expresses his intention to buy dips in Bitcoin even if there is initial weakness due to heightened uncertainty.
US Treasury Market Concerns
Hayes also shares his thoughts on the actions of US Treasury Secretary Janet Yellen, suggesting that her efforts to manage the RRP drawdown will only be temporary. He argues that the concerns surrounding the US Treasury market, which led to significant yield spread fluctuations, will resurface and put strain on the financial system. Hayes believes that Bitcoin will once again serve as a real-time indicator of the health of the war-time fiat financial system, highlighting its potential importance during tumultuous times. While Hayes briefly mentions the possibility of peace and global harmony, he dismisses it as unlikely, citing war as a constant element throughout the history of the United States.
“Added to Ukraine’s tab, America’s military budget is set to truly explode – especially if Hamas’ allies, such as Iran, respond by entering the fray via its proxies.” – Arthur Hayes
Hayes also comments on the recent rally in the crypto market, noting that it is not solely driven by anticipation of a spot Bitcoin (BTC) ETF. He highlights the open-ended commitment of U.S. President Joe Biden to support Israel’s war effort and points out that this, along with the escalating military budget and increased government borrowing, has fueled concerns about global wartime inflation.
