Have you ever seen news about trade issues or ‘tariffs’ between countries?
You might wonder, “What does that have to do with Bitcoin?”
It seems like they aren’t connected at all, right?
But some experienced figures in the crypto world, like Arthur Hayes (co-founder of the BitMEX platform and a former banker), think there is a connection.
Let’s look at why some people, particularly Hayes, think this.
Tariffs are basically taxes that a country puts on things bought from other countries.
How could these taxes affect Bitcoin’s price?
The main idea Hayes suggests is this: Big economic changes, like new tariffs, can push governments and banks to do something in response.
And sometimes, what they do involves creating more money.
Think about it: Tariffs can make it harder to buy and sell goods between countries.
This can slow down business and the economy.
Here’s one idea Hayes highlights: If a big economy like the U.S. adds tariffs, its money (the US dollar) might become less popular around the world.
Why? Because people from other countries might sell their US investments (like stocks).
If they move their money out, the US dollar could lose value compared to other money.
(There’s a way to track this, called the US Dollar Index or DXY, but the main point is the dollar might get weaker).
Why does this matter for Bitcoin?
If the dollar seems weaker, some people might look for other things to invest in to protect their money’s value.
Things like gold, or even Bitcoin, might start looking better to them.
Here’s another angle Hayes points to: Think about countries facing the tariffs, like China.
If high tariffs make it difficult for China to sell its products to other countries, China’s money (the Yuan or CNY) could also lose value.
When a country’s money seems less stable, people living there might look for ways to protect their savings.
This might lead people in China to look for safer places for their savings, maybe even outside the usual banks.
Some think this could make Bitcoin more interesting to them.
Finally, let’s talk about central banks, especially the US Federal Reserve (often called the ‘Fed’).
If tariffs cause big problems for the economy (like slowing it down), the US central bank (the Fed) might try to help. Hayes noted that signs in the bond market suggested traders expected this.
Also read: Ethereum’s Price Dip Explained: Key Factors for Beginners to Watch
How? By making it easier to get money.
This could mean cutting interest rates, so it’s cheaper to borrow money.
Or, they might use something called ‘Quantitative Easing’ (QE).
QE is like the central bank pumping more money into the economy to try and get things moving again.
When interest rates are low and there’s more money around, putting money in a regular savings account doesn’t earn you much.
So, people might look for investments that could grow faster, even if they are riskier.
Bitcoin is often seen as one of these options.
So, the chain reaction idea championed by Hayes is: Tariffs cause economic problems.
Central banks might react by lowering rates or adding money (QE).
This makes saving less rewarding and borrowing cheaper.
Which could make assets like Bitcoin seem like a better option for some investors.
This is just one theory, and it’s complicated.
Not everyone agrees it will happen this way.
Other experts also think that big upsets in world finance, maybe started by tariffs, could push more people towards Bitcoin.
Remember, these are just ideas about how big world events might affect crypto, with Arthur Hayes being a vocal proponent of this particular view.
It shows that the traditional money world and the world of digital money like Bitcoin might be more connected than you think.
Knowing about these possible connections can help you understand why the crypto market moves sometimes, even when the reasons aren’t obvious.
What’s your take on the connection between global economics and Bitcoin?
Share your thoughts in the comments below!
Key Takeaways:
- Some experts, like Arthur Hayes, think big economic changes, like tariffs, could indirectly be good for Bitcoin.
- One idea is that tariffs could weaken currencies like the US dollar or Chinese Yuan, making people look for other assets like Bitcoin.
- Actions by central banks to help the economy (like lowering interest rates or adding money via QE) could make riskier investments like Bitcoin seem more appealing, a point Hayes emphasizes.
- Knowing about these big economic ideas can help explain Bitcoin’s price changes, but it’s a complex theory.
- This shows how the regular money system and digital money like Bitcoin might be linked.
