Arthur Hayes, founder of BitMEX and current Chief Investment Officer of Maelstrom, discussed the relationship between Bitcoin and interest rates in his keynote speech during Korea Blockchain Week.
Arthur Hayes Says The Relationship Between Bitcoin and Interest Rates Is Deteriorating
Hayes noted that despite the harshest Federal Reserve (Fed) interest rate hike cycle in recent years, Bitcoin and other risk assets have not followed the expected downward path.
Hayes argued that although the expectation suggested a bearish scenario for Bitcoin and risk assets due to interest rate increases, a new dynamic had emerged.
Economists have been forced to revise recession forecasts, Bitcoin has doubled in value since the FTX exchange crash, and tech stocks like Nvidia are soaring.
Hayes explained that the Fed's move to raise interest rates to combat inflation had unintended consequences.
Rising financial asset prices can increase capital gains taxes and government revenues. However, when the Fed raises interest rates, these prices can stagnate, reducing tax revenue.
In this scenario, Hayes argued, political decisions to tighten austerity increase deficits, leading the U.S. Treasury to issue more bonds.
As a result, interest payments to the wealthy stimulate spending and nominal GDP growth, creating a paradox in which the FED's interest rate increases inadvertently trigger economic growth.
Hayes emphasized that the cryptocurrency industry is in a good position, regardless of whether the Fed increases or decreases interest rates, and stated that Bitcoin can perform much better in the future.
*This is not investment advice.
