When a major conflict or war breaks out, many investors respond by running toward hard assets like gold or land — anything that can’t be conjured from thin air by a government with urgent bills to pay.
Thus, you might expect that the U.S. conflict with Iran would have crypto insiders scrambling to load up on scarce assets like Bitcoin (BTC 5.04%). But not Arthur Hayes, a famous crypto investor and the co-founder of the BitMEX crypto exchange, who said on the Coin Stories podcast on March 10 that he would not put even a single dollar into the coin right now.
He also claimed that the widespread idea that war is favorable for Bitcoin is inaccurate. So what exactly is it that’s stopping him from buying the coin here, if not the attack on Iran?
Image source: Getty Images.
Money printing tends to move Bitcoin
Elaborating on his Bitcoin stance, Hayes argued that war is not something that lifts Bitcoin’s price — it’s the money printing that wars sometimes generate that sends the coin higher. Hayes says that he will start buying Bitcoin again when the Federal Reserve starts running the presses, and also that the longer the conflict drags on, the greater the risk of there being a major plunge for Bitcoin as well as for stocks.
Let’s unpack what he’s saying in a bit more detail.
In short, the relationship between Bitcoin and what gives a cryptocurrency like Bitcoin its value comes down, in large part, to liquidity. When central banks expand the money supply (a broad measure of circulating cash, savings, and near-cash instruments), risk assets like crypto tend to climb. Bitcoin has tracked this pattern with unusual fidelity, and its bull markets have consistently overlapped with periods of expanding global liquidity, often with a lag period of a few months.
Today’s Change
(-5.04%) $-3722.10
Current Price
$70202.00
Key Data Points
Market Cap
$1.4T
Day’s Range
$69537.00 – $73981.00
52wk Range
$60255.56 – $126079.89
Volume
52B
But there’s a problem with Hayes’ model. The Fed isn’t easing (increasing the amount of circulating money in the supply) right now, and it isn’t hinting at it either.
Consumer prices rose 2.4% year over year in February, and the potentially imminent energy shock from the disruption to oil traffic in the Iran-adjacent Strait of Hormuz threatens to push that figure frighteningly higher. If energy costs rise sharply and stay elevated, which is more and more likely with every day the conflict continues, inflation could reach 3% by year’s end, well above the Fed’s 2% target. Therefore at present it appears to be the case that the confrontation is making interest rate cuts less likely, not more, which is the opposite of what Hayes’ thesis requires to green light buying Bitcoin.
This means that investors waiting for a printing press signal before buying may be in for a long wait, and they might miss out on some gains as a result.
Don’t try to predict the future
You don’t need to tie yourself to taking the same approach to investing in Bitcoin as Arthur Hayes. It’s actually probably best to take a longer-term perspective, because whether the Fed loosens policy this year, and regardless of the reasons for its course of action, Bitcoin’s supply dynamics will continue to tighten on autopilot.
Only about 450 new coins enter the market each day as a result of Bitcoin mining, and that figure will get cut in half at the next halving event in early 2028. Changes in liquidity might boost or depress the coin’s prices between now and then, as well as afterward. No matter what happens, there will never again be as much new supply entering the market as there is now, so future buyers will be competing over a smaller quantity of coins, which biases the price to the upside over the very long term.
Hayes may well be right that the optimal conditions for a Bitcoin macro-driven rally arrives after the Fed begins cutting rates. But most investors don’t have the luxury of waiting for a perfect macro signal. The more practical approach is to build a position gradually by buying at regular intervals whether the price is up or down, and then hold it for years so as to capture the long-term tailwinds that scarcity provides. And that’s what I will continue doing.
The war doesn’t make Bitcoin a buy, but its scarcity does. And scarcity doesn’t need permission from the Federal Reserve to pay off, though it sure might help once in a while.