Arthur Hayes, the former CEO of major cryptocurrency exchange BitMEX, has published a new essay titled “The Denominator.” In the essay, Hayes compares the current situation in the US banking sector to friends splitting the bill at a nightclub and tries to answer the question: Who will pay for the banking crisis ignited by the Federal Reserve’s deflationary policies?
Hayes suggests that the crisis will be solved “at the cost of the lives” of medium and small banks, which he refers to as “not big enough to fail.” According to Hayes, their assets will be absorbed by the big systemic banks, which have guarantees from the US government to cover customers’ deposit losses.
However, Hayes also notes that the real value of money in the pockets of citizens will certainly decrease as the Fed turns its policy around. To address this, Hayes identifies two potential paths forward: reducing the price of money by lowering the Fed rate or increasing the money supply, both of which could lead to the “cheapening” of money.
Hayes ultimately sees salvation in Bitcoin and gold as means of preserving value outside the banking system. He urges readers to “get your Bitcoin, and get out!” if American politicians do not let the banking system collapse.
Hayes’ essay is timely, given the ongoing debates over the role of cryptocurrency and the future of banking in the United States. His arguments about the potential for smaller banks to be absorbed by larger ones and the need for alternative stores of value beyond traditional banking are likely to generate discussion and debate.
In the past, Hayes has been a controversial figure in the cryptocurrency world, with BitMEX facing charges of illegally operating a derivatives exchange and violating anti-money laundering rules. However, his insights into the banking system and his perspective on the potential of Bitcoin and other cryptocurrencies are sure to be of interest to those following the ongoing evolution of the financial landscape.
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