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BitMEX Co-Founder Lists Reasons for Bitcoin’s Mild Reaction to US Banking Crisis

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BitMEX founder Arthur Hayes
BitMEX founder Arthur Hayes

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On Thursday, BitMEX co-founder Arthur Hayes published a blog post titled “Patience is Beautiful.” In this post, Hayes shed light on the question many crypto believers have been wondering for a long time; Why has Bitcoin (BTC) not increased in value despite the U.S. banking failures?

BitMEX co-founder sketches thorough picture of future economic situation

Hayes is famous for his deep insights into the dynamics of crypto and financial markets. He has provided a fresh perspective on Bitcoin’s mild reaction to the ongoing uncertain environment of the United States banking crisis. In his blog, he sketched a thorough picture of the future economic situation, which involves big actors of the economy like the Central Bank, U.S. Treasury, debt-to-GDP ratio, interest rate, money printing, and inflation, among others.

If we look at the figures, the current state of the United States government does not look promising, with $31.8 trillion in debt against the current GDP of $26.4 trillion and $4.6 trillion in annual tax returns. Recently, U.S. President Joe Biden and Kevin McCarthy, Republican House Speaker, disclosed a draft bill to prevent the looming debt crisis. According to this deal, the debt ceiling will be suspended entirely until 2025. However, various cost-cutting measures were also disclosed to avoid any similar consequences until then.

Hayes stressed that no matter how Fed chooses to tackle the ongoing economic situation, whether it be a rate cut or a rate hike, it will end up creating inflation. This, according to him, will ultimately prompt exits of the fiat monetary-financial system into other safe-haven assets. Hayes also predicted that the debt ceiling would be lifted in the summer of 2023, which would lead the U.S. Treasury to issue trillions of dollars worth of debts.

The ensuing situation would cause short-term government debt interest rates to increase, and bank deposits to decrease. This, according to Hayes, would force Federal Reserve to cut rates, making banks profitable, and increasing inflation.

On the other hand, Fed could also keep raising rates, leading the banks to keep failing, hence more money printing. Hayes said that both ways would eventually benefit gold, bitcoin, and A.I. tech stocks.

BitMEX Founder Explains Bitcoin’s Contradictory Behavior As Hedge Against Financial Instability

This statement backs the popular expectation for Bitcoin, a well-known hedge against financial instability. However, the current Bitcoin market situation is the opposite, as Bitcoin is experiencing major resistance at $28K. Hayes explained this contradictory behavior of Bitcoin in his blog post and listed the following reasons for it.

Hayes argued that people are flocking toward traditional safe havens during this time of uncertainty. The banking failure in the U.S. prompted an immediate “flight to safety,” where people rushed towards the U.S. dollar (USD), the biggest safe-haven asset in the world. He stated that despite being an epicenter of the U.S. banking crisis, the greenback is still the world’s reserve currency, and many people still consider it a safe and secure option over others. However, Hayes still hopes people will eventually realize and shift towards Bitcoin.

The second reason behind the placid performance of Bitcoin was the initial stage of the banking crisis. According to Hayes, the banking crisis has not reached its peak as of yet, and there is mild demand for safety. As the crisis matures, the investor’s priority will shift from liquidating volatile positions to finding new alternatives like BTC. He further stressed that the financial system had been modernized, where movements were complicated. The outcomes of a crisis often need a maturation period before becoming more visible, since then other asset classes like bitcoin will experience a lack of interest.

Bitcoin is yet to be fully recognized as a “digital gold.” Hayes states that bitcoin sentiment is still different among the crypto and broader markets. In the crypto industry, bitcoin might have achieved the status of digital gold, but it is still far from being recognized as a hedge against financial uncertainty in the broader market sentiment.

“Patience Is The Answer” BitMEX Founder

In closing, Hayes stresses that Patience is the answer. He expects Bitcoin to consolidate in the short term. However, in Q3 or Q4, Hayes expects a bull market for Bitcoin, urging investors to survive this initial unrest and wait for Bitcoin to reveal its true value.

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