Storing cryptocurrencies is "the best way to preserve wealth." In this regard, bitcoin is preferable to gold due to the lack of national control, said Arthur Hayes, ex-CEO of BitMEX.
In a new Zoom Out essay, the expert analyzed three main cycles, starting with the Great Depression of the 1930s and ending with the current situation, focusing on Pax Americana.
He explained his choice by saying that the entire world economy is a derivative of the financial policy of the ruling empire:
1933-1980: The ascending local cycle of Pax Americana;1980-2008: Global Pax Americana Hegemon Cycle;2008 — present: Local cycle of Pax Americana vs. the Middle Kingdom.Hayes identified two types of periods — local and global. The first is characterized by the suppression of "savers" by the authorities to finance wars, the second by the deregulation of finance and the development of world trade.
The local period is inflationary, and the global period is deflationary.
What to invest in
According to the ex-CEO of BitMEX, smart investments over the course of a lifetime are reduced to three categories:
If you believe in the system, but not in those who run it, you invest in stocks.If you believe in the system and those who run it, you invest in government bonds.If you don't believe in the system or those who run it, you invest in gold or another asset that doesn't need a government to exist, such as bitcoin.According to Hayes, the shares are a court—backed legal fantasy. These securities require a strong state to exist and maintain their value for a long time.
During a period of local inflation, an investor should own gold, in conditions of global deflation — stocks.
Current cycle
According to the expert, the current cycle started in 2008 against the background of events in Georgia. The development of the confrontation between the West (the United States and its vassals) and Eurasia (Russia, China, Iran) continued in the format of proxy wars in Ukraine and Israel-Lebanon-Syria. The parties ensure that all aspects of the national economy are ready to support the war effort, he added.
In relation to this analysis, this means that the "savers" will be obliged to support the expenses of their countries in wartime. They will be subjected to financial repression. The banking system will distribute most of the loans in favor of the state in order to achieve certain political goals.
This time, capital is able to leave the system freely. At the beginning of the current local cycle, bitcoin offered another currency without a state. The key difference between it and gold is that the ledger of the first cryptocurrency is maintained using a cryptographic blockchain, and money moves "at the speed of light."
Hayes noted that in the context of easing monetary policy, businesses direct resources to buy back shares and transfer production to other countries with lower labor costs. As a result, the American military machine has become dependent on the United States, he stated.
The ex-CEO of BitMEX noted that in such circumstances, either the state will directly order banks to lend to a particular industry/company, or institutions will be forced to buy government bonds at below-market yields. In the latter case, the authorities will be able to distribute subsidies and tax benefits to "necessary" enterprises.
"In any case, the return on savings will be lower than nominal growth and inflation. The only way to save yourself, if you do not introduce capital controls, is to invest in an off—system store of value, such as bitcoin," Hayes stressed.
If in the previous cycle investors should have monitored the size of the central bank's balance sheet, then this one is the budget deficit and the total volume of non—financial bank loans.
Why Bitcoin?
The ex-CEO of BitMEX is confident that the world is on the threshold of a new megalocal inflationary cycle, primarily for nation states, so he remains confident in digital gold.
The expert cited the forecast of the US budget deficit in fiscal year 2024 ($1.92 trillion), which will exceed $1.7 trillion over the previous 12 months. The value will be the highest level in the entire COVID-19 era due to a 27% jump in costs.
Hayes urged not to worry about a recession in Pax Americana amid a budget deficit of 7.3% of GDP.
"There will be no recession. This does not mean that most ordinary people will not find themselves in a difficult financial situation. [...] Investing in cryptocurrencies is the best way to preserve wealth. I am sure that today will echo the 1930s and 1970s. [...] Devaluation is coming through the expansion and centralization of the distribution of loans through the banking system," he explained.
Recall that in June, Hayes and Real Vision CEO Raul Pal named strong altcoins, highlighting the potential of Solana (SOL) and Aptos (APT).
Earlier, the former head of BitMEX called for opening a long for bitcoin and later for shitcoins due to the start of the rate reduction cycle.
Prior to that, Hayes predicted the growth of the first cryptocurrency to $70,000 by the end of the summer.