Arthur Hayes sees a “Balkanization of finance” coming soon as crypto rally
Good morning. Here’s what happens:
Prices: Bitcoin and Ether are well in the green as they approach highs not seen since the Covid-induced bull market.
Insight: For former BitMex CEO Arthur Hayes, traditional banking is broken and finance will never be the same.
Bitcoin and Ether are well in the green as the Asia business day begins, with Bitcoin pushing past a yearly high of $30,000 and Ether beginning to test $2,000.
While bitcoin’s relationship with the current banking crisis has made it a clear winner over the past month, there are many questions about how the Ethereum network’s Shanghai upgrade will affect the price of ether.
Is that what the ether needs to rise forward? Or does ether just follow bitcoin’s gains?
Ether Capital CEO Brian Mosoff calls it a “non-event.”
“My suspicion is that this is going to be a non-event in terms of price,” Mosoff told CoinDesk TV’s “First Mover” on Monday. “I expect you’ll see more ETH locked into stake, either from solo stakers, or again, you’ll see more structured products come to market.”
Meanwhile, the futures market is pricing in modest gains for ether on contracts expiring at the end of June.
New inflation data is scheduled to be released on April 12, which should show that the Fed has tamed the beast, and that has always been positive for crypto and risk assets.
“We will likely see continued accumulation from long-term investors interested in their currency depreciation hedging properties, while short-term movements are dictated by changing theories about what monetary liquidity will do,” Noelle Acheson, the author of Crypto’s Macro Now newsletter, recently wrote.
Arthur Hayes is not mincing words about banking
During the coldest days of 2022’s crypto winter, when the wreckage of FTX was still smoldering, VanEck predicted that bitcoin could fall to $10K-$12K by the first quarter of 2023.
“Bitcoin will test $10,000-$12,000 in Q1 amid a wave of miner bankruptcies, which will mark the low point of the crypto winter,” Matthew Sigel, head of digital asset research at VanEck, wrote at the time.
But VanEck was wrong about something big: the price of bitcoin.
2023 has been defined by being a mini bull market. So far this year, bitcoin is up about 80%, currently just over $30,000.
And it’s all in the face of crypto-friendly banks Silvergate and Signature collapsing.
“It’s all driven by the collapse of the Western banking system,” Arthur Hayes said in a recent interview with CoinDesk. “The world recognizes that the entire Western banking system is bankrupt and they are all fed.”
Bitcoin’s correlation with traditional assets breaks as it acts as an asset outside the traditional fiat banking system, Hayes says, pointing to the S&P 500’s 7% gain so far this year, versus bitcoin’s more than 80% gain.
And what does the Hayes portfolio look like when the Western banking system gives way?
Bitcoin, gold, real estate and maybe even some assets in RMB.
“I’m going to go into all these other things that are not directly related to the banking system,” he said. “I want to own assets in Dubai and all these other regions that actually have a real economy other than just printing money.”
Hayes is not a total dollar doomer – his prediction is that it will still be in use with the US and its allies, but it will no longer be the world’s reserve currency. The next decade will see the balkanization of currencies, with the dollar accounting for 40-50% of trade (between 1999-2019 it accounted for 74% of Asia-Pacific trade and 96% of America trade).
“The West will be a dollar block, and other non-allied countries will use gold, dirhams, CNY, rubles, whatever,” he said. “When you go to different places, you have to use a different currency, and everyone becomes currency speculators more than they are today.”
What about the price of bitcoin?
Hayes is not discounting the possibility of bitcoin hitting $1 million, and has been a vocal supporter of Srinivasan on Twitter. But that can’t happen for a while.
“I know it’s coming and I think bitcoin will just keep climbing. Will it reach $70,000 this year? I doubt it,” he said. Europe. You would also probably want a very explicit guarantee for all deposits in the Western world from central banks.”
At this point, Hayes argues, the market will know it must be in bitcoin, gold, ether or other assets.
“Anything that isn’t stocks and government bonds,” he says.
How could you not be bullish on crypto?
Ethereum developers have begun referring to the blockchain’s upcoming hard fork—in this case, a key upgrade—as “Shapella.” Ether Capital CEO Brian Mosoff joined the conversation ahead of the two major Ethereum network upgrades expected to happen simultaneously on April 12. In addition, TRM Labs head of legal and public affairs, Ari Redbord, discussed the Treasury Department’s first analysis of illicit financial risks associated with DeFi.
