- Arthur Hayes shared what he believes is the most profitable strategy for investing in digital assets.
- The expert discussed government bond yields and proposed alternatives.
- He argues that countries’ policies of uncontrolled money printing push investors towards Bitcoin.
In a new essay, former BitMEX CEO Arthur Hayes outlined which investors he considers the most “prudent” and highlighted factors for the continued growth of the cryptocurrency market.
“Left Curve” is an essay on why you aren’t bullish enough about #crypto. It’s time to shut your eyes and BTFD!https://t.co/0pQyOjZhPS pic.twitter.com/r9QUiGYZTG
— Arthur Hayes (@CryptoHayes) April 23, 2024
According to him, there are traders who pride themselves on having “bought Solana at $10 and sold at $200.” However, truly insightful investors are those who adhered to the “left curve” mindset during the bear market of 2021-2023.
This approach involves buying and holding digital assets, especially the first cryptocurrency, until the peaks of the bullish cycle, Hayes explained.
“Bitcoin is the hardest money ever created. If you sold shitcoins for fiat that you don’t need for living expenses, you messed up. Traditional money will be printed endlessly until the system resets,” he added.
Escape from the External World
The businessman noted that major economic powers like the US, China, the EU, and Japan are deliberately devaluing their national currencies to pay off government debt.
Meanwhile, TradFi has the opportunity to profit from this situation through spot Bitcoin ETFs, Hayes pointed out.
As a result, institutions are urging clients to protect assets from currency devaluation. As the former BitMEX head explained, the influx of institutional investments strengthens the growth of the crypto market, thereby affirming the idea of a “safe haven asset”:
“The macroeconomic situation that caused a surge in fiat liquidity and boosted Bitcoin will become even more pronounced when the sovereign debt bubble begins to burst.”
Hayes also discussed the concept of Gross Domestic Product (GDP), which includes inflation and real economic growth. He argues that governments borrow money to finance projects, hoping to “accelerate development and attract investors with promising returns.”
However, politicians often manipulate the system by keeping government bond yields below GDP growth rates. This allows for more spending without raising taxes but leads to stock and economic stagnation, the entrepreneur clarified.
The Right Choice
According to Hayes, the crucial task for investors is to determine whether government bonds are a good investment. To do this, one must compare the nominal annual GDP growth rate with the yield on 10-year government bonds:
“Real yield = 10-year government bond yield – nominal GDP growth rate. When the real yield is positive, government bonds are a good investment. When the real yield is negative, government bonds are a terrible choice.”
The main “trick” is to find assets outside the banking system that can grow faster than inflation, claims the former BitMEX CEO.
Hayes examined the USNOM index, which tracks the real yield in the US and the balance of the Fed. According to the chart, after the deflationary shock of the 2008 global financial crisis, the indicator shifted from positive to negative.
“Except for 2009 and 2020, government bonds have been terrible investment choices compared to stocks, real estate, cryptocurrency, and so on. Bond traders succeeded only by leveraging their trades with insane amounts of credit,” the expert emphasized.
The BitMEX co-founder argues that the polarized political landscape in the US ahead of the presidential election will only exacerbate the weakening of government assets.
As both major parties vie for power and plan extensive spending programs, the incentive to maintain negative real yields and encourage uncontrolled borrowing will intensify, he believes.
“The lifeline for this period has been and remains Bitcoin. It grows non-linearly on a logarithmic chart. Its dynamics are manifested by the limited number of coins, whose value is expressed in depreciating fiat dollars,” Hayes noted.
In conclusion, the crypto trader advised taking advantage of the opportunity presented by the recent market correction and gradually increasing the cryptocurrency portfolio ahead of the summer:
“I urge all degens to the left curve. Your guess that money printing will accelerate as politicians spend on handouts and wars is correct. Do not underestimate the current elites’ desire to stay in power. If real rates become positive, reassess your confidence in cryptocurrency.”
Earlier, Hayes suggested a potential drop in Bitcoin following the halving that took place on April 20. In his view, the event is a bullish catalyst for the crypto market in the medium term.
As reported in ForkLog, experts explained the post-halving dynamics and forecasted future developments.