Arthur Hayes, a well-known American entrepreneur, co-founder and former director of the BitMEX crypto exchange published a new essay titled «Forward, Bitcoin», in which he stated that «monetary chemotherapy» in the Chinese economy would boost the prices of bitcoin and other assets. Hayes noted that global economic crises and monetary stimulus are leading to increased demand for the first cryptocurrency amid the weakening of fiat (i.e. traditional) currencies, in particular the US dollar.
According to the businessman, the Chinese government will have to invest hundreds of billions of dollars in its economy in an attempt to save the stagnant real estate market. This will affect bitcoin.
The decline in demand for loans makes traditional measures such as lower interest rates and a moderate budget deficit ineffective. To prevent deflation, governments are resorting to powerful monetary incentives: bank recapitalization and quantitative easing (QE) – the central bank prints money, buys government debt and stimulates the economy. Asset prices, such as stocks and real estate, rise, forcing people to invest again, but this raises inflation. Such measures support asset prices, but do not necessarily improve the real economy – the middle class and the poor suffer from rising prices, while the financial elites benefit. Therefore, bitcoin and cryptocurrency prices will also rise along with the increase in fiat.
«Bitcoin — is not a foreign concept to the Chinese, and they will not let it sit idle. P2P commerce is picking up again in China, the yuan is weakening, and cryptocurrencies are booming, despite government bans», — Hayes wrote.
To understand what is happening in China, he cited the financial crises of three other major economies: America, Japan, and the European Union (EU). Each of these countries experienced a difficult financial situation caused by a «bubble» in the real estate market that burst.
- Japan in 1989
- America in 2008
- EU in 2011
He noted that rising inflationary risks in China, which suffered from the collapse of the real estate market, as well as skepticism among the younger generation about government stimulus programs in China, Japan, and the United States, will increase the popularity of cryptocurrencies.
In addition, amid news of China’s possible new debt of more than 10 trillion yuan (approximately $1.4 trillion), interest in bitcoin as a hedge against currency devaluation may increase among traders.
Hayes emphasized that previous experience shows that bitcoin has shown significant growth after periods of high national debt and devaluations. Hayes reminded that in 2015, after the devaluation of the yuan, the price of bitcoin increased almost 5 times.
«After the shock devaluation of the yuan by the People’s Bank of China, bitcoin rose from $135 to $600 — almost 5 times in less than 3 months», the crypto investor wrote.
New home prices in China reached their lowest level in 9 years in July 2024. Despite numerous incentives, including lower mortgage rates and reduced housing costs, the government failed to stabilize the market. Prices fell by 4.9% year-on-year, the largest decline since June 2015. Only two cities, Shanghai and Xi’an, showed a slight increase in new home prices.
According to a survey by the People’s Bank of China, 23.2% of the population expects housing prices to fall further in the third quarter, a record high since 2013.
Source: Reuters
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