Arthur Hayes Identifies China’s Economy as Key Driver for Bitcoin Price Surge

Demand for Bitcoin is set to soar due to the inevitable economic stimulus measures by Chinese authorities, according to former BitMEX CEO Arthur Hayes in a new essay.

“加油比特币 — Let’s Go Bitcoin” is an essay about how China’s stimulus will pump trillions of $ into the financial markets and levitate #crypto.https://t.co/oUg4exFp1V pic.twitter.com/a20WdIwu20

— Arthur Hayes (@CryptoHayes) October 28, 2024

In the essay titled Let’s Go Bitcoin, the expert noted that China is facing the largest real estate bubble in history. Similar causes previously led to major crises in Japan (1989), the US (2008), and the EU (2011).

“China’s economy, like any other victim, subsequently fell into a liquidity trap or balance sheet recession. […] To prevent severe deflation, a monetary and fiscal bazooka is needed,” Hayes emphasized.

Despite all claims about the advantages of its political and financial systems, the Chinese government will resort to traditional measures in such cases, he is convinced. This “monetary chemotherapy” includes two components:

• recapitalizing the banking system with state funds and easing requirements so that institutions can “on paper” restore their balance sheets;
• a policy of quantitative easing (QE) with money printing for massive government debt purchases.   

“Given that the Chinese real estate bubble was the largest in human history, the amount of credit created in yuan will rival the sum of dollars printed in the US in response to COVID in 2020-2021,” the expert asserts.

In his view, the influx of money into the economy and the threat of further inflation will lead to increased investments in risky assets. Users will primarily consider Bitcoin as an investment vehicle, as it surpasses other assets in capital preservation reliability, Hayes believes.

He noted that the first cryptocurrency is “not an unfamiliar concept” for middle and high-income residents of the country, who will not allow their money to devalue. 

In his opinion, the ban on Bitcoin trading was due to the authorities’ reluctance for digital gold to serve as a kind of “fire alarm” for economic problems. However, owning cryptocurrency in the country is not prohibited.

Hayes pointed out that the P2P market is reviving in China, with leading exchanges like Binance, OKX, and Bybit actively conducting business.

However, an immediate market reaction to QE from the People’s Bank of China and accelerated bank lending should not be expected, the expert emphasized.  

“But when the average wealthy coastal resident Zhou decides he needs Bitcoin at any yuan price, the volatility will remind us of August 2015, when after the shock devaluation of the Chinese currency, BTC rose from $135 to $600 — nearly five times in less than three months,” he suggested.

In September, analysts at QCP Capital concluded that stimulus measures in China could support risky assets like the first cryptocurrency.