Last month, Bitcoin had its second-worst day ever when the crypto asset fell alongside the stock market and crashed by 53%, peak to trough, as investors went for the safety of the US dollar.
This 2020 Coronavirus crash, however, according to crypto derivatives exchange BitMEX co-founder Arthur Hayes was “inevitable.”
In his latest newsletter, Hayes talked about how the current economic environment and that it is running high with the expectation of inflation.
During this changed economic regime, precious metal gold is set to shine. As for Bitcoin, he thinks the loose economy and financial market is the “biggest opportunity” for the world’s leading digital asset in its short lifetime.
“Where the Bitcoin price may shine is in the volatile inflationary aftermath of the response to the crash,” Hayes said.
As we reported, investors sold everything from cryptocurrencies, equities, stock market, oil to gold.
This 2020 coronavirus stock market crash Hayes said is establishing itself as “one of the great stock market crashes,” alongside 2008’s Global Financial Crisis of 2008, 2000’s Dotcom bubble, the Asian crisis of 1997s, Black Wednesday from 1992, Japan asset bubble of 1991, Black Monday of 1987, 1973’s Oil crisis, and Wall Street Crash of 1929.
Central banks respond fast to this crisis by injecting money into the markets and announcing a stimulus program of trillion dollars. The Fed started with purchasing more government debt and slashing interest rates down to 0% but if these are pushed down further into negative, “the public will simply hoard physical cash.”
We have also reached the “reversal interest rate,” “where the impact on commercial banks of further interest rate declines is a net negative,” said Hayes in the post written in the week following the market crash.
The central bank expansionary monetary policy has also reached its limits and now any further extreme measures will only have a net negative impact on the economy.
“Brrrrrr bring it Powell. I got my pocket rockets – Gold and Bitcoin,” tweeted Hayes.
The CEO of BitMEX that reported a DDoS attack the day Bitcoin crashed and went even lower on $3,600 that day argued, the monetary policy of the central bank has an “uncertain outcome.” But what is the clear winner is inflation.
“Not only will inflation come, but it will be a shock,” because for the past 30 years inflation has been low and stable and the “public are unaware of the risks,” and financial markets will also be affected which are used to the current regime of being protected by “central bank put.”
According to him, we are headed back to the 1970s when inflation was volatile and climbed to 15%. “Volatile times are ahead,” Hayes said.
In his post from yesterday, Hayes further elaborated on his belief in Bitcoin, which is “the hardest form of digital money.”
However, bitcoin could still retest $3,000, because when SPX dumps, “expect all asset classes to puke again.” But his end of 2020 target remains $20,000.
And “If you think I’m full of shit, or a stark-raving Cassandra, remember what you believed in pre and post-COVID. Can your mental model revert back to January 2020? I will take my inflation adjusted pocket rockets (gold and bitcoin), and call your Bretton Woods seven two off suit. All in, mother fuckers,” Hayes wrote.