Here’s how TradFi’s volatility cycle benefits crypto, according to Arthur Hayes

Arthur Hayes, co-founder of cryptocurrency exchange BitMEX, believes that Bitcoin is the “release valve” for fiat printed by traditional financial governments to suppress the volatility of financial markets to unnatural levels.

In an essay titled Volatility Supercycle, Hayes discussed how politicians printing money to create a quiet economic surface unleashes crypto volatility and pushes the value of digital assets to new highs.

Suppress volatility in TradFi

Hayes asserted that policymakers cannot manage any form of volatility in financial markets because of the system’s overleverage. The American businessman has always been of the opinion that the Federal Reserve (Fed) prints more money when “the shit hits the fan”. He said this political response is the result of the authorities not wanting to admit that no one knows what will happen in the future.

Based on the premise that keeping an inflated ball underwater requires more energy to maintain its position as it goes deeper, Hayes insists that the amount of printed money needed to maintain the state of volatility increases exponentially every year. At this rate, the amount of money that will be printed between now and the eventual reset of the financial system would dwarf the total amount printed from 1971 to date.

According to Hayes, the volatility distortions of traditional financial systems are extreme globally, but even more intense in Pax Americana because the United States cares about the bond market as it is the asset that underpins the dollar (USD), which is the global reserve currency. Other nations focus on controlling the volatility of their national currencies against the USD because it affects their ability to trade with the world.

Positive effects on Bitcoin

Since the financial crisis of 2008, the gross level of bank credit has not fully declined. Hayes said that fiduciary credit could not be eliminated because the financial system would collapse under its weight. In addition, banks have been forced to create even larger amounts of credit to “stifle” volatility.

US banks are expected to issue more credit after the Fed’s latest rate cut, which eased monetary conditions. As credit increases, the fiat printed to keep volatility in check will find its way into crypto and increase asset values ​​in the coming months.

Hayes added that the goal of every investor should be to acquire bitcoin (BTC) at the cheapest possible cost because the volatility of Bitcoin vs. fiat is an asset.

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