Bitcoin price could rise despite Middle East escalation and rising commodities, says Arthur Hayes

Is Bitcoin doomed to rise, no matter the scenario?

Arthur Hayes, co-founder of the BitMex exchange, recently published a blog post in which he believes that the price of Bitcoin should continue to rise despite growing tensions in the Middle East between Iran and Israel, as well as a possible rise in commodity prices.

In his publication entitled “Persistent Weak Layer” (PWL), which can be translated as “persistent weak layer”, he explains that the ongoing conflict could, in the event of intensification of clashes between the two regional powers, cause a major collapse of global financial markets.

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He clarifies his concerns, particularly regarding the possible use of nuclear weapons:

“The avalanche that interests us from a financial markets perspective concerns the reaction of energy prices, the impact on global supply chains, and the possibility of a nuclear weapons exchange in the event of a escalation of hostilities between Israel and another Middle Eastern country, particularly Iran or its allies. »

According to Hayes, 2 scenarios are possible: a first where the PWL remains intactthat is to say a scenario where military actions remain limited and of low intensity, and a second where the PWL gives inwith the destruction of several important oil infrastructure, disrupting oil supplies, driving up energy prices and causing a crash in financial markets.

However, Arthur Hayes argues that in either scenario, the store of value and neutral asset characteristics specific to Bitcoin will allow it to withstand the crisis.

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Bitcoin, the safe haven of the 21st century

Hayes takes the example of the oil shocks of the 1970s, where gold, as a neutral asset, served as a safe haven, with its price increasing by 2,200% in 10 years, from $35 to $840. .

However, 1971 also marks the end of the gold standard, when currencies, including the dollar, were uncorrelated with the yellow metalallowing central banks to create more liquidity.

For a similar scenario to repeat itself for gold or appear for Bitcoin, central banks, particularly the Federal Reserve (FED) of the United States, would need to further increase the money supply.

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However, since September 2024, the FED has precisely formalized its monetary pivot by lowering its interest rates for the first time since the 2020 health crisisand could continue to do so to avoid a recession in the US economy.

All the conditions could therefore be met to contribute to the devaluation of fiat currencies, firstly by a flight of capital towards other assets, but also by a strong increase in the money supply leading to high inflation which would amplify this effect.

Finally, Arthur Hayes warns that escalating conflicts in the Middle East could also affect the Bitcoin mining industryin particular by reducing the hashrate in Iran, which some studies estimate to be around 5% of the global hashrate.

However, even if the hashrate were to decrease locally, a general increase in the price of electricity could benefit mining on a global scalegiven that Bitcoin mining is one of the only industries capable of consuming surplus energy produced by power plants.

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Source: Medium

First attracted by the lure of gain, I am now trapped deep into the rabbit hole. With no way out, I just have to share my knowledge and convey the passion I have for Bitcoin. I am also the creator of Adopt a Block, an educational site dedicated to Bitcoin.

Marius Farashi Tasooji

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