BitMEX founder Arthur Hayes released a lengthy article titled “Trump Truth”, analyzing the profound impact of Trump’s policies on the global economy, especially in terms of monetary policy and financial markets after taking office. He made predictions on how the US, Japan, China, and Europe will respond to the “Trump Truth”, and these changes will also drive the growth of the Bitcoin and cryptocurrency markets.
What is the truth behind Trump Truth?
Arthur Hayes compares US President-elect Donald Trump to a tool to reveal the truth, which is also in line with his social platform Truth Social, suggesting that Trump’s truth can reveal the true situation of various countries in geopolitical and economic issues. He believes that Trump’s outspokenness forces other world leaders to acknowledge and address the problems they face.
What is the truth behind the US?
Trump hopes to achieve America’s re-industrialization by weakening the US dollar, providing tax breaks, and relaxing regulations.
Dollar depreciation! Depreciate against what?
Trump and the incoming Treasury Secretary, Bezent, have repeatedly discussed the need to weaken the dollar to achieve America’s economic goals. The question is, what should the dollar depreciate against, and when should it depreciate?
The US has 8,133.46 tons of gold, the most among all sovereign nations, and Hayes believes that the fastest way to achieve dollar depreciation is by “depreciating against gold.”
The price of gold on the US balance sheet is $42.22 per ounce. However, the current spot price of gold is around $2,647. Assuming Bezent can convince the US Congress to change the statutory price of gold to depreciate the dollar against gold. In this scenario, the Treasury Department can receive US dollar loans in the Federal Reserve’s TGA account.
Is Bitcoin strategic reserves possible?
There has been much discussion recently about Bitcoin Strategic Reserves (BSR). US Senator Lummis proposed legislation to force the Treasury Department to purchase 200,000 BTC annually within five years. Interestingly, if you read the bill, she suggests funding the purchase by raising the price of gold held on the government’s balance sheet, as described above.
If the US government creates more dollars by changing the value of gold and uses some of those dollars to buy Bitcoin, its statutory price will rise. This, in turn, will stimulate other countries that need to catch up with the US to engage in competitive sovereign purchases. The price of Bitcoin will gradually rise.
However, Hayes does not believe that Bitcoin strategic reserves will happen. He believes that politicians would rather spend newly created dollars on providing welfare to the people to ensure their victory in the next upcoming election. However, whether the US will implement Bitcoin strategic reserves is not important, as the mere threat of it will create buying pressure.
What is the truth behind China?
Chinese President Xi Jinping has two major problems to solve, creating employment opportunities for over 20% of unemployed youth and preventing a decline in housing prices.
To do this, China must implement quantitative easing (QE) and further allow the renminbi to float freely. Renminbi devaluation will allow Chinese manufacturers to export more. In the short term, this will help Xi Jinping to have a better position in negotiations with Trump because he must agree to some of the demands of the Trump team in exchange for Chinese manufacturers to have better access to American consumers.
What is the truth behind Japan?
There is a serious financial imbalance between Japan and the US. Japan is the largest holder of US Treasury bonds. Japan also implements aggressive quantitative easing policies, evolving into Yield Curve Control (YCC), leading to extreme weakness in the yen against the dollar.
Trump’s truth is that the yen should strengthen against the dollar. The Bank of Japan must raise interest rates, but will this trigger a massive unwinding of yen carry trades in August?
Hayes believes that because the US naval bases in Japan deter China’s maritime activities, and Japan’s semiconductor production helps ensure the US has friendly access to key components, Trump will instruct Bezent to take necessary measures to ensure Japan can withstand the impact of yen appreciation economically. One way is for Bezent to use the power of the US Treasury to provide a US dollar-to-yen central bank currency swap to the Bank of Japan, allowing any sale of government bonds and US stocks to be absorbed over-the-counter.
What is the ultimate truth globally?
Our ultimate truth is the 24/7 cryptocurrency market. Following Trump’s victory in early November, the rise in Bitcoin is a leading indicator of the accelerated growth of fiat currency supply. To respond to Trump’s truth, every major economic group/country must react immediately. Their response is currency depreciation and strengthening financial repression.
The image below shows Bitcoin (yellow line) leading the increase in US bank loans (white line).
How does Hayes predict the recent trends in crypto?
Before we enter the collapse and prosperity stage of the cryptocurrency bull market, Hayes believes that the cryptocurrency market will experience a painful decline around Trump’s inauguration day on January 20, 2025. His family office Maelstrom will reduce some positions in advance, hoping to repurchase some core positions at lower prices at some point in the first half of this year.
However, few traders can accurately time the highs and lows. If the bull market continues until January 20, Maelstrom will admit defeat, lick its wounds, and return to the bull market.
Trump’s truth has shown me the structural flaws in global order. Trump’s truth tells me that the best way to maximize returns is to own Bitcoin and cryptocurrencies. Therefore, I will buy on dips.
Risk Warning
Investing in cryptocurrencies carries a high level of risk, and prices may fluctuate dramatically, leading to a loss of the entire principal. Please carefully assess the risks.