Cryptocurrency derivatives exchange BitMEX co-founder and CEO Arthur Hayes in his latest newsletter talked about the current economic environment with high inflationary expectations. According to him, while gold is set to shine in this changed economic regime, it is Bitcoin’s “biggest opportunity.”
In March, Bitcoin crashed by almost 53%, peak to trough as investors raced to the US dollar. According to Hayes, this 2020 Coronavirus crash was “inevitable.” As we have been seeing this past month, the economy and financial markets are set loose and this could be Bitcoin’s opportunity, in its short lifetime. Hayes said,
“Where the Bitcoin price may shine is in the volatile inflationary aftermath of the response to the crash.”
Fed printer Goes Brrrrrr, Got Gold & Bitcoin
In March, Bitcoin wasn’t the only to crash, it actually fell alongside every other asset, equities, stock market, oil, and gold. The 2020 coronavirus stock market crash is establishing itself as “one of the great stock market crashes,” right alongside the Global Financial Crisis of 2008, Dotcom bubble of 2000, 1997s Asian crisis, 1992’s Black Wednesday, Japan asset bubble in 1991, Black Monday of 1987, Oil crisis in 1973, and Wall Street Crash from 1929.
Central banks responded fast, purchasing more government debt and cutting the interest rate down to 0%. However, below zero and into the negative territory means “the public will simply hoard physical cash.”
In his post written in the week following the market crash, Hayes said that we have reached the “reversal interest rate” and the limits of central bank expansionary monetary policy and any further extreme measures will have a net negative impact on the real economy.
— Arthur Hayes (@CryptoHayes) April 9, 2020
Central banks' monetary policy has an “uncertain outcome” with inflation as the clear winner. And the inflation will come and it will be a shock which we haven't seen for over 30 years, as such it will be a sudden economic and cultural shock, argued Hayes.
This will take us back to the 1970s when inflation was volatile and reached a high of 15%. And financial markets won't be unaffected by this which is used to the current regime where they are protected by a “central bank put.”
“Volatile times are ahead,” Hayes said.