Arthur Hayes, co-founder of BitMEX, anticipates a surge in Chinese demand for Bitcoin BTC/USD as Beijing leans towards aggressive monetary stimulus to combat the effects of its prolonged property crisis.
What Happened: Hayes argues that China's adoption of quantitative easing (QE)—mirroring approaches used by the Federal Reserve and European Central Bank—will drive yuan debasement, making Bitcoin a more attractive option for wealth preservation.
In a blog post issued Monday, Hayes suggests that, should China implement large-scale QE, as many economists expect, this would likely lead to a significant yuan devaluation.
This "monetary chemotherapy," as Hayes calls it, would primarily benefit large financial institutions and well-capitalized players while gradually eroding purchasing power for average citizens.
"Bitcoin is not a foreign concept to middle and high-income coastal urban dwellers," Hayes notes, pointing out that Chinese citizens are adept at utilizing P2P platforms, including Binance and OKX, to convert yuan into Bitcoin.
Following China’s property bubble, which Hayes describes as "the largest in human history," Beijing's monetary measures thus far have been insufficient to revive broad economic growth.
But Hayes suggests that QE, even if introduced gradually, will eventually scale to "tens of trillions of yuan" to counteract deflation and boost nominal GDP.
"China will ultimately follow the same path as the Fed, ECB and Bank of Japan," Hayes predicts, with similar impacts on domestic currency stability.
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Why It Matters: Historically, Bitcoin has responded favorably to fiat currency debasement.
Hayes highlights the yuan devaluation in 2015 as an example, when Bitcoin spiked from $135 to $600 in just three months.
With this in mind, he views China's potential QE as a probable catalyst for Bitcoin's next price rally, asserting, "When the wealthy coastal living Zhou decides they must have Bitcoin at any yuan price, the upside price volatility will harken back to August 2015."
The landscape Hayes describes points to significant implications for the broader cryptocurrency market, especially as Chinese interest in Bitcoin could rise in response to Beijing's economic policies.
While the Chinese government remains cautious about openly facilitating Bitcoin transactions, Hayes contends that access remains within reach.
“The exchanges operate P2P message boards where local traders assist comrades in trading crypto," he explains, describing it as a resilient market despite regulatory controls.
What’s Next: This intersection of economic policy and Bitcoin demand will be explored at Benzinga's Future of Digital Assets conference on Nov. 19, where industry leaders will discuss global economic shifts and how policies like China's prospective QE could impact the future of digital assets globally.
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