BitMex co-founder explains how central banks could be forced to make a sudden change.
One of BitMex's co-founders explained how central banks all over the world could be forced to make a sudden change.
Arthur Hayes – co-founder of the crypto trading platform BitMex – published a lengthy blog post on Thursday arguing that central banks will be forced back into "money printing" due to various economic pressures. In his blog post, Hayes argues that central banks will come under increasing pressure to print money in order to prop up economies around the world.
I believe that the money printing that is happening will eventually lead to inflation, which will in turn drive up the prices of alternative forms of money, such as crypto and gold. This could be a good thing for those who invest in these forms of currency, but it could also lead to economic instability down the road.
Inflation is Inevitable
In Hayes's post titled "Contagion," the former CEO began by highlighting the immediate difficulties of the global economy following the decision of major central banks to tighten monetary policy. Hayes warned that the global economy is in a "precarious state," and that the actions of central banks could trigger a major market crash. The CEO urged readers to take precautions and be prepared for a potential economic downturn.
The worst-hit markets were sovereign debt markets, with a bond market rout that has been nearly the worst in recorded human, financial history. This has had a knock-on effect on other markets, with investors withdrawing money from stocks and other risky assets. This market turmoil has caused widespread panic and uncertainty, with many people worried about the future of the global economy.
It is clear that quantitative tightening is having an adverse effect on bond yields in some markets. The Bank of England's recent decision to return to quantitative easing shows that this issue is not going away anytime soon. Pension funds are especially vulnerable to rising yields, and it is clear that something needs to be done to protect them. Otherwise, we could see a wave of insolvencies in the near future.
I predict that more and more central banks will adopt similar measures to those being undertaken by the Fed in order to address similar problems. The ECB is already purchasing bonds for some of its weaker member states, and I believe that other central banks will eventually follow suit. This will help to stabilize the global economy and prevent future financial crises.
The EU is suffering from a lack of affordable energy due to Germany's current energy policy, which may harm the country's economic output and position as an exporter. If other countries stop buying German products with euros, the currency will become even weaker against the dollar.
“Without cheap energy, Germany will have to attempt to print their way out of their problems,” said Hayes. “And just like every other nation, they will issue more bonds to cover fiscal transfers.”
The European Central Bank is expected to announce an expansion of its quantitative easing program to include Germany, in response to the country's increasing issuance of bonds. This policy shift could cause yields on German bonds to skyrocket, as has already been seen in the UK.
Crypto and Gold: The Perfect Investment Combo?
I believe that Mr. Hayes is correct in his assessment that central banks are increasingly pursuing yield curve control policies. I believe that this will benefit assets like gold and cryptocurrencies, which are global and relatively volatile.
“Given the gold and crypto markets are much smaller in size than the trillions in fiat money that will be printed, in non-USD currency terms these assets will appreciate,” he said.
I agree with Hayes that Bitcoin will rise due to other central banks' actions. I believe that an arbitrage opportunity will emerge across foreign exchange markets for both Bitcoin and gold, driving up the USD value of each. This will benefit Bitcoin holders and could lead to even more mainstream adoption of the currency.
“This process will not be immediate,” he concluded. “Once the politicians set in motion the policies necessary to placate their electorate, the bond markets will have none of it.”
As we all know, central banks around the world are constantly printing money. In recent years, this has been done in an effort to stimulate economies and prevent recessions. However, Arthur Hayes, the CEO of BitMEX, believes that central banks will soon be forced to print even more money.