Arthur Hayes, the co-founder of BitMEX, recently published an essay titled “Zoom Out,” where he delves into the parallels between historical economic upheavals and the current financial landscape. He categorizes economic cycles into “Local” and “Global” cycles, emphasizing the importance of understanding these cycles in predicting future trends in the Bitcoin and crypto market.
Hayes outlines Local Cycles as periods of intense national focus characterized by economic protectionism and financial repression. These cycles typically result from governmental responses to severe economic crises, leading to inflationary outcomes due to devaluation of fiat currencies and increased government spending. On the other hand, Global Cycles are marked by economic liberalization, encouraging global trade and investment, resulting in deflationary pressures due to increased competition and efficiency in global markets.
Hayes draws a direct parallel between the creation of Bitcoin in 2009 and the economic environment of the 1930s. He argues that Bitcoin’s emergence during a renewed Local cycle, characterized by global recession and central bank interventions, mirrors past periods where alternative assets like gold gained prominence. Just as gold served as a safe haven during times of economic uncertainty and inflation in the past, Hayes posits that Bitcoin’s decentralized nature makes it well-suited to serve a similar purpose in today’s volatile economic climate.
He highlights Bitcoin’s value proposition in times of inflation and financial repression, emphasizing its state-independent nature as a key strength. Hayes predicts that the current fiscal and monetary policies, including the surge in the US budget deficit, will enhance the appeal and value of Bitcoin as history repeats itself in terms of asset valuation during Local cycles.
Hayes expresses confidence in Bitcoin’s future, drawing parallels between today’s economic conditions and those of the 1930s-1970s. He believes that loose fiscal and monetary policies will continue to drive the value of Bitcoin as a wealth preservation asset. In his essay, Hayes rhetorically asks why he is confident in Bitcoin regaining its value, pointing to historical trends and the debasement of fiat currencies through credit expansion as driving forces behind Bitcoin’s potential rise in value.
Hayes advocates for holding onto crypto assets as a means of preserving wealth in the face of impending economic challenges. He sees today as a reflection of past economic cycles, where the value of non-state assets like Bitcoin is likely to increase in response to global economic uncertainties. At the time of writing, Bitcoin was trading at $62,649, indicating the cryptocurrency’s continued relevance and potential for growth in the future.
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