Love him or hate him, when Arthur Hayes speaks, people listen.
Last week, as a guest on Impact Theory with Tom Bilyeu, Hayes Make the case This is why it is believed that the price of Bitcoin (BTC) will reach $750,000 to $1 million by 2026.
“I completely agree that there will be a major financial crisis, perhaps as bad or worse than the Great Depression, sometime near the end of the decade, and before we get there, I think we will have the biggest bull market in stocks, real estate, cryptocurrencies, and art.” , you name it, which we’ve seen since World War II.
Hayes cites the almost predictable response of the US government’s rush to intervene in every economic crisis with a bailout as a major catalyst behind the structural problems in the US economy.
This essentially creates an endless cycle of central bank printing, which leads to inflation and prevents the economy from going through natural market cycles of growth and correction, he explained.
“We’ve all collectively agreed that the government is basically there to try to eliminate the business cycle. Like, bad things should never happen to the economy, and if they do, we want the government to come in and destroy the free market. So every time we’ve had a financial crisis over the ’80s What’s going on? The government rushes in and basically destroys part of the free market because it wants to save the system.
Let’s take a quick look at a few of the catalysts that Hayes believes will support Bitcoin’s move into six-figure territory.
Debt and inflation are growing out of control.
According to Hayes, increasing government debt, the large amount that had to be carried over, and declining productivity could only be addressed by printing money. While monetary expansion leads to rising markets, the result tends to be higher inflation rates.
“Primarily, it creates a huge bull market in stocks, cryptocurrencies, real estate, things that have a fixed supply, and maybe are productive and have some profits. But then, we find out that in fact, the government can bail out everything. It can’t Just print as much money as they think to try to save themselves by stabilizing the yield and price of their bonds, and we will witness a generational collapse.
Hayes predicts a “super peak” will occur sometime in 2026, followed by a Great Depression-like situation that occurs by the end of the decade.
The American government bankrupted the banking system
When asked about future contributors to inflation, Hayes focused on the $7.75 trillion in US debt that must be rolled over by 2026 and the yield curve inversion in US bonds.
Traditionally, China, Japan and other countries have been the main buyers of US debt but that is not the case anymore, a change that Hayes believes will worsen the situation in the US.
Why do I like these markets now when yields are rising?
Bank models have no concept of a bear slope occurring. Take a look at the upper 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 U.S. banking system is functionally insolvent because regulators have set the rules in such a way that it is profitable from an accounting perspective, not an economic perspective, to essentially accept deposits and buy low-yielding Treasury securities, and they can do that.” With almost infinite leverage and just a few basis points that vary in price change, everyone makes a lot of money and gets a big bonus.
“Banks collectively bought all these Treasuries in 2021 and obviously the price has come down a lot since then and that’s why we’re facing the regional banking crisis.”
The biggest concern expressed by Hayes is that “at the structural level, the US banking system cannot afford to buy more debt, because it cannot afford to because it is structurally insolvent. The Fed has committed to quantitative tightening, so it is not accumulating more Treasuries.”
The market is internalizing that, and the nuance here is that even though Treasury interest rates are rising, gold prices remain high, and some market participants who were previously Treasury buyers aren’t interested, Hayes explained.
Currently, the struggle of banks to attract deposits, and the difficulty of matching interest rates on their deposits with current rates available in the market, is leading to pressures on revenues and debt management at a level that could become critical to the function of the entire banking system. Like many cryptocurrency advocates, Hayes believes that it is at times like these that a certain group of investors begin to consider different investment options, including Bitcoin.
Hayes’ view on why Bitcoin reached $750,000
Despite what appears to be a generally bleak outlook for the global and US economy, Hayes still expects the price of Bitcoin to outperform, and has set a target estimate in a range of $750,000 to $1 million by the end of 2026.
Hayes expects Bitcoin to continue,
“Reducing $25,000 to $30,000 this year as we get into some sort of financial turmoil and people realize that real interest rates are negative. “If the economy is growing at a nominal rate of 10%, but I’m only getting 5% or 6%, Even though it’s high, people on the sidelines will start buying other things, and crypto will be one of those things.”
Come 2024, Hayes said either the financial crisis will push interest rates closer to 0% or the government will continue to raise interest rates, but not as quickly as governments spend money and people continue to look for better returns elsewhere.
Final approval of a spot Bitcoin ETF in the US, Europe and possibly Hong Kong, as well as a halving event, could push the price to a new all-time high of $70,000 in June or July of 2024. Reclaiming the all-time high by the end of 2020 2024 is when “the real fun starts and the real bull market starts” and Bitcoin enters “$750,000 to $1 million on the upside.”
When asked if the estimated price level would remain stable, Hayes agreed that a 70% to 90% pullback in Bitcoin’s price would occur, just as it does after every bull market.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.