Arthur Hayes, the former head of major cryptocurrency exchange BitMEX, has written a new essay called “The Denominator” in which he attempts to answer the question of who will pay for the banking crisis fueled by the Fed’s deflationary policies. In his essay, Hayes compares the current situation in the U.S. banking sector to friends splitting the bill at a nightclub. Hayes believes that the crisis will be “solved” by the “not big enough to fail” medium and small banks, whose assets will be absorbed by the larger systemic banks that have guarantees from the U.S. government to cover customers’ deposit losses.
Despite this, Hayes claims that the real value of money in citizens’ pockets will certainly decline as the Fed shifts its policy. To combat this, Hayes suggests two possible solutions: reducing the price of money by lowering the Fed rate or increasing the money supply, both of which would also lead to the “cheapening” of money. If American politicians do not decide to let the banking system collapse and run its course, then they will resort to one of these options, according to Hayes. In both cases, he sees salvation in Bitcoin and gold as means of preserving value outside the banking system.
“Get your Bitcoin, and get out!” Hayes concludes his essay.
The banking crisis in the United States, fueled by the Federal Reserve’s deflationary policies, has left many Americans wondering who will pay for it. Arthur Hayes, former head of major cryptocurrency exchange BitMEX, believes the crisis will be “solved” by the “not big enough to fail” medium and small banks, whose assets will be absorbed by the larger systemic banks.
However, this solution comes with a cost, as Hayes predicts that the real value of money in citizens’ pockets will decline as the Fed shifts its policy. Consequently, he suggests two possible solutions to preserve value outside the banking system: reducing the price of money by lowering the Federal Reserve rate or increasing the supply of money. In both scenarios, Hayes sees salvation in Bitcoin and gold as means of preserving value.
With the prospect of a banking crisis looming, many people are searching for ways to protect their wealth. While there is no one-size-fits-all solution, there are measures that individuals can take to safeguard their assets, such as diversifying their investment portfolios to include alternative assets like cryptocurrencies and precious metals.
In Hayes’s view, Bitcoin and gold are attractive because they offer a hedge against economic uncertainty and are relatively uncorrelated to traditional financial markets. Furthermore, cryptocurrencies like Bitcoin have demonstrated their ability to appreciate in value over time, making them an appealing long-term investment for some investors.
As for Hayes’s advice to “get out,” it is crucial to approach any investment decision with caution and consider the risks involved. Investing in Bitcoin and gold can be risky due to factors such as price volatility and regulatory uncertainty, so it is essential to research thoroughly and consult with a professional financial advisor when appropriate.
In conclusion, while the future of the U.S. banking system remains uncertain, Arthur Hayes firmly believes that investing in Bitcoin and gold is a sound strategy for preserving wealth in the face of financial turmoil. As the former head of a major cryptocurrency exchange, his insights into the crypto market may be valuable to those seeking alternative investments. However, it is imperative that individuals approach these decisions with caution and ensure they are well-informed before investing in any asset class.
To protect yourself from the impact of a potential banking crisis, consider the following strategies:
1. Diversify your investment portfolio, including alternative assets like cryptocurrencies and precious metals, which may be less affected by fluctuations in traditional financial markets.
2. Research the potential risks and benefits of investing in Bitcoin and gold, and consult with a professional financial advisor if necessary.
3. Keep a close eye on developments in the U.S. banking system and Federal Reserve policies, as these factors could significantly impact the value of your investments.
4. Continually reevaluate your investment strategy and be prepared to adjust your portfolio if necessary to minimize risk and maximize returns.
5. Stay informed about the global economy and potential financial crises, as they could also have far-reaching implications for your investment strategies and financial well-being.
