Arthur Hayes Says Zoom Out and Focus on Broader Trends, Highlights Bitcoin as Superior Safe-Haven Asset

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  • Co-founder of BitMEX, Arthur Hayes, says Bitcoin remains the best investment option as the world marches inexorably towards war and economies look to “financially repress” investors.
  • Hayes says the current economic era “rhymes with” the 1930s and 1970s, which were also periods where bets against the system on assets like gold outperformed the stock market.
  • He thinks the US government’s massive forecast increase in spending in the lead up to the election means a recession is extremely unlikely, further strengthening the case for Bitcoin.

Arthur Hayes, the co-founder and former CEO of crypto exchange BitMEX, said in a recent blog that the current global economic and geopolitical climate resembles the conditions in the 1930s and 1970s—and while that’s bad for almost everything, it’s good for Bitcoin.

Hayes says that there is currently an inexorable march toward war, and nations around the world are turning inward and refocusing their economies on war preparation. This means investors and savers will be asked to finance this war expenditure and will be “financially repressed”, as they were during the 1930s, according to Hayes.

Billionaire hedge fund manager Ray Dalio of Bridgewater Associates has recently said the chances of a third world war had increased to around 40% given the Israel-Hamas conflict, political divisions in the US and tensions between the US and China. 

The former BitMEX CEO says that despite concerns that the latest crypto bull market has petered out, Bitcoin remains the best game in town as it represents a store of value outside the state-controlled financial system and will soon be the only real option for investors looking to get returns greater than nominal growth rates.


Related: Arthur Hayes on 2024 Trading Strategy: “It’s Easy Actually” 

He argues crypto remains the best investment option for the coming cycle, warning of the looming debasement on the horizon:

I’m pointing this out because I believe fiscal and monetary conditions are loose and will continue to be loose, and therefore, hodl’ing crypto is the best way to preserve wealth. I am confident that today will rhyme with the 1930s to 1970s, and that means, given I can still freely move from fiat to crypto, I should do so because debasement through the expansion and centralisation of credit allocation through the banking system is coming.

Arthur Hayes, Co-founder and former CEO of BitMEX

The Next Economic Period Will Resemble 1930s, Says Hayes

In his essay, Hayes says since the Great Depression there’s been three major economic cycles:

  1. 1933–1980 Pax Americana Ascending Local Cycle
  2. 1980–2008 Pax Americana Hegemon Global Cycle
  3. 2008–Present Pax Americana vs. the Middle Kingdom Local Cycle

The 1933-1980 era, Hayes says, was defined by financial repression—privately investing in gold was banned, bank deposit rates were capped and fixed-income securities yields were below inflation. This left the stock market as the only option for investors.

However, Hayes says that once investors were again allowed to “bet against the system” by investing in gold starting on December 31, 1974, gold started to massively outperform the stock market.

Hayes describes the 1980-2008 era as when America was at the peak of its powers, further opening up its economy to global trade and becoming the world’s sole superpower. During this time the stock market outperformed gold as confidence in the financial and political system was high.

The 2008-Present is similar to the 1930s, in that America has faced another “deflationary economic collapse”, Hayes posits. But this time instead of banning private ownership of gold, the state has used quantitative easing to save the economy.

Hayes believes that as nations move towards war, investors will be called on to fund the military spending, investors will be “financially repressed” as they were in the 1930s as the banking system looks to “allocate the majority of credit in the state’s direction to accomplish certain political goals.”

Related: Aussie Analysts Decode Three Key Factors Behind Bitcoin’s Recent Drop to $60K

So Why Would This Financial Disaster Be Good For Bitcoin?

According to Hayes, Bitcoin has performed so well since its launch in 2009 because it has provided a “stateless currency”, similar to gold but able to move at the speed of light, allowing investors a store of value outside the traditional financial system—essentially a bet against the system, as gold was in the 1970s.

What about Bitcoin’s future though? Well, Hayes says he is confident that we are “in the midst of a new mega-local, nation-state first, inflationary cycle”, precisely the kind of cycle that is very good for Bitcoin. As an additional piece of evidence for this belief, Hayes cites the Congressional Budget Office’s forecast of a huge increase in the government’s 2024 budget deficit:

The U.S. budget deficit is projected to surge to $1.915 trillion in fiscal 2024, exceeding last year’s $1.695 trillion and marking the highest level outside the COVID-19 era, according to a federal agency that attributed the 27% increase compared to its earlier forecast to higher spending.

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Hayes says this level of government spending makes it “mathematically very difficult” for the US economy to go into recession in the near future, saying:

If another GFC happened this year at a similar severity to the last one, the fall in private economic growth would still not exceed the amount of government spending. There ain’t going to be a recession.

Arthur Hayes, Co-founder and former CEO of BitMEX

Jody McDonald

Jody McDonald

Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.

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