Co-founder of BitMEX Arthur Hayes said of current geopolitical tensions, “This could be a high Bitcoin (BTC) price surging event.” War-related spending, especially in the Middle East, could increase government borrowing and inflation, according to him.
This would, in turn, save the US dollar from weakening, and would act as a hedge against devaluation of the currency.
Rising Middle East Tensions Could Boost Bitcoin Prices
Hayes says increasing tension between Israel and Iran in the Middle East could have global market implications. If we were to spend more money on the military, using debt, those funds would then end up on the balance sheets of the Federal Reserve and commercial banks.
Inflation could increase, weakening the dollar and encouraging Bitcoin as an inflation hedge. The basis of this theory is a historical pattern in which the conflict has seen monetary expansion, which often runs into inflation.
He compares this to past situations, such as the 1973 energy crisis when hard assets — like gold — also surged in value. However, he predicts that Bitcoin — called “digital gold” — will reflect the same in today’s digital economy.
US War Spending Could Boost Bitcoin Demand
Speaking to CNBC, Arthur Hayes argued that the US spent so much money through its debt-financed war spending that Bitcoin’s price could be catalyzed.
With more dollars circulated, it becomes more likely that investors will consider Bitcoin a store of value against which to protect purchasing power.
This is relevant in particular with rising inflation, as the latest US Producer Price Index (PPI) data exceeded the forecast at 1.8%. The concern with the Federal Reserve’s (Fed) monetary policy is that injecting liquidity further will likely result in higher inflation.
This, Hayes says, provides favorable conditions for long-term appreciation of Bitcoin. Just as gold has in the past, Bitcoin could be a safer bet for investors than fiat currency devaluation.
BTC Offers Stability as Global Tensions Rise
Meanwhile, Hayes also predicts that rising energy prices in the Middle East could further strengthen Bitcoin as buyers see it as a hedge against increasing conflict. If oil infrastructure is disrupted or the strait is closed, energy costs could skyrocket. In this scenario, Bitcoin could become a kind of “stored energy” in financial markets.
Supply disruptions would pressure fiat currencies by inflating already high energy prices. For those looking to stay afloat during volatile times, Bitcoin may be a decentralized asset. Bitcoin may gain from this, but market volatility could also rise thanks to geopolitical stability, advises Hayes.
Hayes says optimism is great, but you need risk management in times like these, Especially with smaller cryptocurrencies; he recommends sticking to something wise and avoiding impulsive decisions. Reducing exposure to highly volatile assets can minimize the impact of geopolitical tensions on drawdowns in the crypto market.
As debt-financed, war-related policies continue, Hayes concludes that Bitcoin’s growth potential remains strong. Bitcoin might see a good run because the US government continues to provide military aid to Israel and expand its Fed’s balance sheet. Bitcoin has proven to be a successful crash cushion against weak fiat currency for decades.
