Arthur Hayes, the co-founder of crypto exchange BitMEX, has recently offered a comprehensive analysis in his latest essay, “Zoom Out,” drawing compelling parallels between the economic upheavals of the 1930s-1970s and today’s financial landscape, specifically focusing on the implications for the Bitcoin and crypto bull run. His in-depth examination suggests that historical economic patterns, when properly understood, can provide a blueprint for understanding the potential revival of the Bitcoin and crypto bull run.
Understanding Financial Cycles
Hayes begins his analysis by exploring the major economic cycles starting from the Great Depression, through the mid-20th century economic booms, and into the stagnant 1970s. He categorizes these transformations into what he terms “Local” and “Global” cycles, central to understanding the broader macroeconomic forces at play.
Local Cycles are characterized by intense national focus where economic protectionism and financial repression are prevalent. These cycles often arise from governmental responses to severe economic crises that prioritize national recovery over global cooperation, typically leading to inflationary outcomes due to the devaluation of fiat currencies and increased government spending.
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Global Cycles, in contrast, are marked by periods of economic liberalization, where global trade and investment are encouraged, often leading to deflationary pressures due to increased competition and efficiency in global markets.
Hayes carefully examines each cycle’s impact on asset classes, noting that during Local cycles, non-fiat assets like gold have historically performed well due to their nature as hedges against inflation and currency devaluation.
Hayes draws a direct parallel between the creation of Bitcoin in 2009 and the economic environment of the 1930s. Just as the economic crises of the early 20th century led to transformative monetary policies, the financial crash of 2008 and subsequent quantitative easing set the stage for the introduction of Bitcoin.
Why The Bitcoin Bull Run Will Resume
Hayes argues that Bitcoin’s emergence during what he identifies as a renewed Local cycle, characterized by the global recession and significant central bank interventions, mirrors past periods where traditional financial systems were under stress, and alternative assets like gold rose to prominence.
Expanding on the analogy between gold in the 1930s and Bitcoin…
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