Bitcoin Emerges Victorious as Federal Reserve Expands ‘Fiat Toilet Paper’ Printing, Remarks Arthur Hayes

Arthur Hayes, co-founder of BitMEX, has given his thoughts on the Federal Reserve’s continuous battle against inflation, implying that this situation might help assets such as Bitcoin. Hayes expressed his views in a recent blog post in which he explores into the mechanics of the Federal Reserve’s operations and their prospective influence on various financial assets.

Hayes pointed out in his study that the Federal Reserve’s method to controlling inflation entails removing funds from one area of the economy while concurrently infusing funds into another. According to Hayes, this method creates a circumstance in which the value of finite-supply risk assets, like as Bitcoin, may expand over time.

According to Hayes, one of the primary elements fueling Bitcoin’s potential value increase is its fixed supply. As existing fiat currencies continue to increase owing to inflationary policies, Bitcoin’s scarcity becomes a significant benefit. According to Hayes, Bitcoin might be considered as a hedge against the declining value of fiat currencies.

Hayes also addressed the Federal Reserve’s strategies and apparent shortcomings. As part of this policy, the central bank employs the Reverse Repo Program (RRP) and Interest on Reserve Balances (IORB). Hayes, on the other hand, said that these policies result in the Federal Reserve paying out large sums to depositors, partially countering the intended impact of quantitative tightening (QT).

Furthermore, Hayes contrasted the Federal Reserve’s present approach with the tactics of Paul Volcker, who effectively controlled inflation in the 1980s. According to Hayes, the Fed’s emphasis on manipulating RRP and IORB rates varies from Volcker’s more basic technique. Volcker’s success, according to Hayes, was driven by the size of the Federal Reserve’s balance sheet rather than precise interest rate changes.

Hayes predicted that the Federal Reserve would ultimately reverse its quantitative tightening policy, especially if alternative purchasers for US government debt emerged. This adjustment might occur as the US Treasury attempts to prevent a possible default situation. Despite the potential ramifications of these changes, Hayes observed that the market has not yet transferred substantial money to Bitcoin in response.