{"id":154775,"date":"2023-09-13T06:26:19","date_gmt":"2023-09-13T00:56:19","guid":{"rendered":"https:\/\/dripp.zone\/news\/?p=154775"},"modified":"2023-09-13T06:26:19","modified_gmt":"2023-09-13T00:56:19","slug":"rising-interest-rates-could-actually-pump-bitcoin-arthur-hayes-crypto-news","status":"publish","type":"post","link":"https:\/\/dripp.zone\/news\/rising-interest-rates-could-actually-pump-bitcoin-arthur-hayes-crypto-news\/","title":{"rendered":"Rising Interest Rates Could Actually Pump Bitcoin: Arthur Hayes – Crypto News"},"content":{"rendered":"
\n

Bucking the conventional wisdom about Bitcoin\u2019s relationship with interest rates, popular macro-analyst Arthur Hayes published a blog post<\/a> arguing that such traditional economic logic will crumble under the U.S. government\u2019s exorbitant amount of debt.<\/p>\n

\u201cCentral banks and governments are flailing about trying to use the economic theories of yesteryear to combat the novel situations of the present,\u201d Hayes wrote on Monday.<\/p>\n

Since last year, the Federal Reserve has raised its benchmark rate from 0.25% to 5.25% in an attempt to bring inflation back down to 2%. Though its efforts have proven successful so far, Hayes thinks inflation may prove \u201csticky\u201d going forward, as nominal GDP growth exceeds government bond yields.<\/p>\n

According to Hayes\u2019 estimates\u2014based on data from the Atlanta Fed\u2019s GDPNow<\/a> forecast\u2014nominal Q3 GDP growth remains at a \u201cmind-bogglingly massive\u201d 9.4%, whereas the 2-year US Treasury yield is only 5%.<\/p>\n

\u201cConventional economics says, as the Fed raised rates, growth in a very credit-sensitive economy would falter,\u201d Hayes wrote. This proved true for financial asset markets like stocks and Bitcoin, which cratered in 2022 and washed away capital gains tax receipts for the government, he said.<\/p>\n

Yet lower tax revenue also meant higher government deficits, which must be funded by selling more bonds to repay old debt. For the U.S. government, that means more interest payments to the nation\u2019s wealthy bondholders\u2014which are exacerbated by the higher yield on such bonds in a high-rate environment.<\/p>\n

\u201cTo sum up: when rates rise, the government increases interest payments to the rich, the rich spend more on services, and GDP pumps even more,\u201d Hayes explained.<\/p>\n

So long as the economy continues to expand at a faster rate than the government will pay out through its debt, Hayes believes bondholders may seek yield in more rewarding \u201crisk assets\u201d like Bitcoin.<\/p>\n

In a similar essay last month, Hayes argued<\/a> that Bitcoin would win in the face of a tightening Fed, whose methods may inadvertently increase the money supply.<\/p>\n

\u201cIf the Fed believes that to kill inflation it must both raise interest rates and reduce the size of its balance sheet, then it is cutting its nose to spite its face,\u201d he wrote at the time.<\/p>\n

Analysts generally view lower rates as good for Bitcoin and other risk assets, as cheap money leaves room for investors to speculate for potentially higher returns. In June, Coinbase analysts published a report<\/a> arguing that Bitcoin\u2019s 4-year cycles may be attributable to low-rate central bank policy.<\/p>\n

Hayes still doesn\u2019t discount the positive impact of low rates on Bitcoin\u2019s price, describing the asset\u2019s connection to central bank policy as a \u201cpositive convex relationship.\u201d<\/p>\n

\u201cThings become non-linear\u2014and sometimes binary\u2014at the extremes,\u201d Hayes concluded. \u201cThe U.S. and the global economy is at such an extreme.\u201d<\/p>\n

\n
<\/p>\n

Stay on top of crypto news, get daily updates in your inbox.<\/h3>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Bucking the conventional wisdom about Bitcoin\u2019s relationship with interest rates, popular macro-analyst Arthur Hayes published a blog post arguing that such traditional economic logic will crumble under the U.S. government\u2019s exorbitant amount of debt. \u201cCentral banks and governments are flailing about trying to use the economic theories of yesteryear to combat the novel situations of […]<\/p>\n","protected":false},"author":2,"featured_media":141958,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[230,225,221,227,226,228,229,60,223,224,222],"class_list":["post-154775","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-brave","tag-coinbase","tag-crypto","tag-decentralised","tag-decentralized","tag-decentralized-exchange","tag-erc-20","tag-featured","tag-meme-coin","tag-robinhood","tag-solana"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/154775","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=154775"}],"version-history":[{"count":2,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/154775\/revisions"}],"predecessor-version":[{"id":154781,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/154775\/revisions\/154781"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/141958"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=154775"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=154775"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=154775"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}