Arthur Hayes Suggests BTC Could Help Counter Currency Depreciation in China

Arthur Hayes, the former CEO of BitMEX and chief investment officer at the digital asset investment fund Maelstrom, believes that Bitcoin (BTC) could provide a haven for Chinese citizens dealing with currency depreciation during the country’s economic crisis.

"加油比特币 – Let's Go Bitcoin" is an essay about how China's stimulus will pump trillions of $ into the financial markets and levitate #crypto.https://t.co/oUg4exFp1V pic.twitter.com/a20WdIwu20

— Arthur Hayes (@CryptoHayes) October 28, 2024

China’s Economic Struggles

In his blog post “Let’s Go Bitcoin,” Hayes compared China’s current struggles to past financial crises in Japan, the United States, and the European Union, all triggered by collapsing property markets. He pointed out that the recent downturn in China’s real estate sector has resulted in a balance sheet recession similar to that of other major economies.

The blog post attributes the downturn in China’s economy to the government’s “Three Red Lines” policy, introduced in 2020. This policy set strict borrowing limits for property developers, reducing market liquidity and causing private firms and households to cut spending and save money to recover their finances.

Hayes emphasizes that traditional monetary policy tools, such as lowering interest rates, have proven ineffective in this scenario. He advocates for “monetary chemotherapy” to stimulate the economy, which involves substantial monetary expansion and quantitative easing (QE) measures.

However, he warns that while these policies may provide short-term relief, they can ultimately lead to inflation and destabilize the economy.

“Let’s Go Bitcoin”

In light of these potential issues, Hayes believes that Bitcoin offers an attractive alternative for Chinese citizens seeking to preserve their wealth. He noted that prominent exchanges like Binance, OKX, and Bybit have adapted by facilitating P2P trading, allowing users on the mainland to exchange yuan for cryptocurrency without relying on centralized exchanges.

According to the blog post, Beijing’s decision to shut down BTC/CNY trading pairs was reportedly made to eliminate a potential warning signal regarding the impacts of its currency debasement policies. A functioning market for Bitcoin could encourage investors to view it as a more reliable store of value than stocks or real estate.

In this context, Hayes pointed out the strength of China’s peer-to-peer (P2P) crypto market despite the government’s restrictions on direct BTC/CNY trading pairs. He asserts that no major risky asset class outperforms the effects of currency debasement like Bitcoin, and investors instinctively understand this.

“When it comes time to think about how to safeguard the purchasing power of your savings, Bitcoin will be staring back at you,” Hayes stated.