2024-01-10 07:19:49
According to BitMEX founder Arthur Hayes, BTC Price will be $750,000 by 2026. Here’s how and why.
Love it or hate it, but when Arthur Hayes talks, people listen.
Last week, as a guest on Impact Theory hosted by Tom Bilyeu, Hayes explained why he believes the price of bitcoin will reach between $750,000 and $1 million by 2026.
I fully agree that there will be a major financial crisis, probably as severe or worse than the Great Depression, sometime towards the end of the decade; before we get there, I think we’ll have the biggest bull market in stocks, real estate, crypto, art that we’ve seen since WWII.
Hayes cites the US government’s haste to intervene in almost every economic crisis with rescue packages as one of the main catalysts for the structural problems of the American economy.
He explained that it was essentially a endless cycle of money printing by central banks creates, leading to inflation. And it prevents the economy from going through the natural market cycles of growth and correction.
We all agreed that the government is essentially there to try to end the recession. As if bad things can never happen to the economy, and if they do, we want the government to step in and destroy the free market. So every time there was a financial crisis in the last 80 years. What happened? The government swoops in and essentially destroys part of the free market because it wants to save the system.
Let’s take a quick look at some catalysts that According to Hayes they will support bitcoin becoming six figures.
Rising debt and uncontrolled inflation
According to Hayes, the only way to deal with rising national debt and falling productivity is to print money. Although monetary expansion does lead to bull markets, the consequence is usually high inflation.
First, it creates a bull market in stocks, cryptocurrencies, real estate, and anything that has a fixed supply, maybe is productive, and has some income. But after that we will realize that the government can’t really save everything. You can’t print as much money as they think they are trying to save themselves by fixing their bond yields and prices, and that will lead to a generational meltdown.
Hayes expects a “massive peak” sometime in 2026, followed by a Great Depression-like situation by the end of the decade.
The US government bankrupted the banking system
Traditionally, China, Japan and other nations have been the main buyers of US debt, but that is no longer the case. According to Hayes, the change will make America worse.
Why do I love these markets right now when yields are screaming higher?
Bank models have no concept of a bear steepener occurring. Take a look at the top right quadrant of historical interest rate regimes.
It’s basically empty. pic.twitter.com/P6MQnCU73N
— Arthur Hayes (@CryptoHayes) October 4, 2023
According to Hayes, the US banking system is functionally insolvent because regulators designed the rules so that it was profitable from an accounting point of view, not an economic point of view, to take deposits and buy low-yielding Treasury bills. Moreover, they could do all this with almost infinite leverage and a few basis points of exchange rate variation. Everyone made a lot of money and got a big bonus.
Banks bought these Treasuries collectively in 2021 and obviously the rate has fallen a lot since then and that’s why there is a regional banking crisis.
The biggest concern, according to Hayes, is that “at a structural level, the American banking system cannot buy more debt because it is structurally insolvent. The Federal Reserve is committed to quantitative easing, so it won’t be hoarding more government securities.”
Hayes explained that the market is digesting this, and the nuance here is that despite the high interest rates on US Treasuries, the price of gold remains high and some market participants who used to be buyers of Treasuries are disinterested.
Currently, banks are finding it difficult to attract deposits, and it is difficult for them to adjust their deposit interest rates to the interest rates currently available in the market. This creates a level of revenue and debt management stress that could become critical to the functioning of the entire banking system. Like many cryptocurrency advocates, Hayes believes that in times like these, a certain group of investors will start looking at different investment options, including bitcoin.
Hayes’ take on why bitcoin will rise to $750,000
Despite the generally bleak outlook for the global and US economy, Hayes still expects bitcoin to outperform. By the end of 2026, he puts the estimated target value in the range of $750,000 to $1 million.
According to Hayes, in 2024, either a financial crisis will push interest rates closer to 0%, or the government will continue to raise interest rates. However, they are not doing so as fast as they are spending the money and people are still looking elsewhere for better returns.
The eventual approval of a spot Bitcoin exchange-traded fund in the US, Europe and perhaps Hong Kong, as well as a halving event in June or July 2024, could push the price to a new all-time high of $70,000. Reaching the ATH will be the point when “the real fun and the real bull market begins” and bitcoin will enter the “upward trajectory between $750,0000 and $1 million”.
When asked if the estimated price level would hold, Hayes agreed that there would be a 70-90% drop in the price of BTC after all this. As has happened after every bull market.
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