BitMEX founder Arthur Hayes: “Expanding credit in the Chinese yuan will encourage capital inflows into Bitcoin”

bullish on bitcoin

Arthur Hayes, co-founder and former CEO of cryptocurrency exchange BitMEX, believes that the expansion of credit in China will have a ripple effect on global markets, which in turn will encourage capital inflows into risk assets in general, such as Bitcoin. He expressed his opinion.

The US and China are kinda sorta friends again. How does this new found love translate into stacking sats? Read “Panda Power” for my take. Bonus feature: a small riff on the #BENANCE situation.https://t.co/ohSBPPhJyz pic.twitter.com/vKBPjMZ0Ce

— Arthur Hayes (@CryptoHayes) November 28, 2023

In a blog post titled “Panda Power” published on the 28th, he said that the U.S.-China summit meeting held on the 15th had been an opportunity to “reset the tensions” between the two countries, and that the two countries had “become friends again.” “It has become something like that,” he said, pointing to the easing of tensions.

Hayes also believes that “this new friendship” will accelerate China’s monetary easing, which he describes as “trying to pour gasoline on the fire of a nascent crypto bull market.” We believe that there will be a tailwind for the crypto asset (virtual currency) market.

Relationship between the US dollar and the renminbi

Mr. Hayes pointed out that the United States has recently adopted a policy of “guiding the dollar’s depreciation by increasing the issuance of short-term government bonds,” and that “this strategy of depreciating the dollar has been bearing fruit since early November.”

He sees a situation in which the renminbi appreciates as the dollar continues to weaken. He argued that in this situation, China would have room to “significantly expand the credibility of the renminbi domestically without incurring a depreciation of the currency.”

Hayes also explained that the Chinese economy is characterized by a supply-driven economic structure based on infrastructure investment and manufacturing, so the Producer Price Index (PPI) is used as an indicator for inflation statistics. As the PPI is currently in deflationary territory, the People’s Bank of China has plenty of room to ease monetary policy through credit expansion.

Meanwhile, Hayes suggested that China’s state-owned enterprises, manufacturers and investors will begin to invest their capital overseas because there are no “attractive returns” on investing within China.

To the world financial market

Hayes quoted Michael Pettis, a professor at Peking University and former trader at Bear Stearns, a major U.S. investment bank, as saying, “China ran out of debt absorption capacity in the early 2000s.” Since it is no longer possible to absorb debt profitably, capital will be diverted to financial markets.

And since this capital is a “digital fiat currency” and “globally convertible,” “if China prints more renminbi, it will flow into global markets and drive the prices of all kinds of risk assets.” It will support us,” he said.

Additionally, when renminbi credit is plentiful, global demand for dollar credit and liquidity will decrease, Hayes said. Given that the dollar is the world’s largest funding currency, a fall in credit prices will cause assets with limited supply, such as Bitcoin and gold, to appreciate against the dollar, he added.

Hong Kong’s role

Hayes also pointed out that Hong Kong, which China regards as a special administrative region, is “China’s window to global capital markets.”

Hong Kong has made it clear that it will become a hub for cryptocurrencies and blockchain, and there are several licensed exchanges and brokers for purchasing cryptocurrencies.

China once boasted the world’s largest share of Bitcoin mining, and “every wealthy coastal Chinese person is familiar with Bitcoin and its potential as a store of value.” pointed out. He said the Chinese have been active in investing in Bitcoin since its inception.

As a result, he believes that “if there is a way to legally transfer cash from mainland China to Hong Kong, Bitcoin will become an option for risky assets to be purchased.”

Financial market uncertainty

Hayes expects the Biden administration to remain friendly toward China until after next year’s presidential election. However, the honeymoon between the U.S. and China will not last long, and the trade and financial policies of both countries are likely to change once the vote is over.

“Now is the chance to avoid being adversely affected by China’s credit expansion,” he said.

connection:“The virtual currency bull market will start next year” Arthur Hayes predicts

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