The BitMex co-founder envisions a process in which central banks around the world will likely be forced to turn around quickly. In this perspective, it deals with the course of the global economy. He also shares his views on how developments will affect gold and Bitcoin (BTC) prices.
“Central banks will have to print money”
Arthur Hayes, co-founder of BitMex, wrote a blog post on the global economic outlook. Hayes argues in his article that central banks will be forced to “print money” due to various economic pressures. He also notes that printing money will increase inflation, along with the prices of alternatives such as crypto and gold. In his article titled ‘Contagion’, Arthur Hayes highlights the immediate challenges of the global economy in the wake of the major central banks’ decision to tighten monetary policy. In this context, Hayes comments:
In recorded human and financial history, the worst affected markets have been the government debt markets, with a bond market crash.
Koindeks.com As you follow, bond yields have risen to an unsustainable level in some markets with the introduction of quantitative tightening (QT). Last month, the BoE had to return to QE to quell rapidly rising bond yields. This caused multiple pension funds in the UK to go bankrupt.
Hayes argues that other central banks will eventually “succumb” to similar measures to solve similar problems. For example, the ECB is already buying bonds for some of its weaker member countries. In particular, the EU has a power problem due to Germany’s current power politics. According to Hayes, this could potentially harm Germany’s economic output and export position. So it’s possible that countries with which it trades may stop buying their works, mainly with the euro weakening against the dollar. Hayes explains this issue in the following form:
Without cheap power, Germany will have to look for ways out of its problems. On the occasion, like any other country, it will issue more bonds to cover financial transfers. As Germany issues more bonds, its yields will skyrocket, as it did in the UK. Thus, the EU will extend its QE policy to Germany and all other bond markets in the union.
How will Bitcoin and gold prices be affected?
Hayes takes into account the thesis that many major central banks are rightly ‘on the way’ to yield curve control. From this, he says, ‘global risk assets’ such as gold and Bitcoin will benefit. He expresses his views in the following form:
The gold and crypto markets are much smaller than the trillions of prestige coins that will be printed. Given this situation, these non-dollar currency denominated assets will gain value.
However, the Federal Reserve is pretty stubborn about its hawkish stance. However, Hayes argues that even against the Falcon Fed, Bitcoin (BTC) will rise due to the joint efforts of other central banks. This is because it is an arbitrage opportunity for both Bitcoin and gold that will appear in the foreign exchange markets, ultimately increasing the dollar value of each. For this, Hayes makes the following statement:
This process will not be quick. None of this will happen in the bond markets if politicians take the necessary policies to cheer their voters up.