Bitcoin’s Recent Rally and Its Driving Factors
Arthur Hayes, the co-founder of BitMEX, a prominent crypto derivatives exchange, has offered his unique insights into the recent surge of the cryptocurrency market. Contrary to popular belief that the rally is solely due to anticipation of a spot Bitcoin (BTC) ETF, Hayes presents a compelling argument.
The Impact of Hawkish U.S. Foreign Policy
In a thought-provoking essay titled “The Periphery,” Hayes delves into the factors he believes are propelling the crypto market forward. He attributes the recent surge to the costs associated with hawkish U.S. foreign policy, especially concerning Israel’s military campaign against Hamas.
Hayes underscores the indefinite commitment of U.S. President Joe Biden to support Israel’s war effort. He points out that this commitment, coupled with an escalating military budget and increased government borrowing, has given rise to concerns about global wartime inflation.
Institutional Investors React to Expanding Military Expenditure
Hayes contends that institutional investors, foreseeing an expansion in U.S. military expenditure, have already begun to divest from bonds and treasury bills. They are actively exploring alternative asset classes to seek better returns.
He posits that should long-term U.S. Treasury bonds cease to offer the safety net they once did, investors will turn to alternatives like gold and, notably, Bitcoin.
Gold and Bitcoin: A Rise Driven by Genuine Wartime Inflation Concerns
Hayes expresses his belief that both gold and Bitcoin will witness an upswing, propelled by genuine apprehensions regarding global wartime inflation. He references Bitcoin’s recent surge, which was momentarily driven by false rumors of SEC approval for the BlackRock spot Bitcoin ETF.
Recent Crypto Market Performance
Hayes’s analysis coincides with a period when Bitcoin has experienced a remarkable 19.5% surge in just seven days. While many have attributed this rally to progress on BlackRock’s Bitcoin ETF application, Hayes suggests that it is also fueled by concerns surrounding global wartime inflation due to increased military spending.
The overall market capitalization of digital assets has surged by 12.6% during this same period. Hayes further points out that gold, too, has experienced a rally since the conflict in Gaza began. Since the beginning of the month, gold has shown an 8.6% increase, trading at $1,975 per ounce.
At the time of writing, Bitcoin is trading around the $34,000 mark, showing relative stability over the past day.