Arthur Hayes Reveals How China Could Help Bitcoin Surge

Chinese government stimulus spending could be the catalyst to see Bitcoin pump to new heights according to crypto influencer and founder of crypto exchange BitMEX, Arthur Hayes.

In his latest blog post Hayes argues that the Chinese government’s rumoured plans to launch a AU$2.13 trillion ( US$1.4 trillion) stimulus package could encourage wealthy Chinese investors to flock to Bitcoin as a hedge against monetary debasement — despite official bans on Bitcoin trading in mainland China.

All the stars are aligned for Beijing to print an insane amount of yuan. What is the antidote for the plebes who will witness a rise in credit creation that isn’t necessarily predicated on a strengthening real economy? Bitcoin 加油!

Arthur Hayes, BitMEX exchange founder

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Bitcoin Bans Unlikely to Stop Chinese FOMO

Hayes says that despite the bans, trading of Bitcoin is thriving in mainland China with investors taking advantage of peer-to-peer trading methods offered by major exchanges such as Binance and OKX to work around the restrictions. 

The BitMEX founder also suggests that the ban on BTC/CNY trading pairs is largely just an attempt by the government to reduce the usefulness of Bitcoin trading as an indicator of Chinese currency devaluation, noting that owning crypto is still legal.

Given that the Chinese government knows it cannot ban Bitcoin, and Bitcoin and crypto ownership is not banned in China (contrary to what some misinformed financial media say), Beijing would rather it be out of sight and out of mind.

Arthur Hayes, BitMEX exchange founder

Hayes points to historical data to support his theory that Chinese currency devaluation will boost Bitcoin’s price, highlighting Bitcoin’s almost 5x pump from US$135 to US$600 in 2015 following the devaluation of the yuan. He believes that if the Chinese government goes ahead with its huge stimulus plans, it’s likely the yuan’s value will drop and wealthy Chinese investors will once again flock to Bitcoin as a hedge.

No major risky asset class outperforms the debasement of the currency like Bitcoin does.

Arthur Hayes, BitMEX exchange founder

Despite his belief that Chinese investors will pour into Bitcoin, Hayes concedes it could take some time for them to pull the trigger, perhaps waiting until the impact of stimulus spending on the value of the yuan becomes clear. In the meantime, Hayes says investors may initially opt for other investments, such as real estate.

Chinese Stimulus Plans

Reuters is reporting that China is considering approving a plan to raise 10 trillion yuan (AU$2.13 trillion) in new debt as early as next week at a meeting of China’s top legislative body, the Standing Committee of the National People’s Congress (NPC). The debt would mostly come in the form of special government bonds, which will be issued over a period of three years.

The debt raising amounts to more than 8% of the output of the Chinese economy, which has become increasingly fragile in recent years following a huge, drawn-out property sector crisis and skyrocketing local government debt.

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The decision has apparently been planned to coincide with the US presidential election, allowing the government some flexibility depending on who wins the election. The stimulus package could potentially be even larger if Trump wins, with fears inside China that his promised tariff plan will harm China’s economy.