As published on: forbes.com, Friday 1 December, 2023.
BitcoinBTC 0.0% and crypto prices—including major coins ethereum and XRPXRP 0.0%—have surged this year (with a surprise crypto-based AI plan from ethereum founder Vitalik Buterin potentially opening up a new avenue this week).
The bitcoin price has more than doubled over the last 12 months as the market gears up for a Wall Street earthquake that some expect to turbo-charge the bitcoin, ethereum, XRP and crypto market.
Now, as rumors fly around "bitcoin's worst kept secret," legendary bitcoin and crypto trader Arthur Hayes has predicted China is about to "flood the world with yuan credit," something he thinks will "flow into hard monetary assets like bitcoin."
"If China is printing yuan, it will make its way into the global markets and support the prices of all types of risk assets," Hayes, who cofounded crypto derivatives pioneer BitMex, wrote in a blog post, adding China is about "to throw gasoline on the raging fire that is the incipient crypto bull market" and "flood the world with yuan credit."
Hayes, now chief investment officer at investment fund Maelstrom, pointed to rising expectations the Federal Reserve will soon begin unwinding its tight monetary policy, leading to the U.S. dollar weakening and allowing China to "engage in a massive round of stimulus" that will revive its property market and increase infrastructure spending.
Recent data has shown a brief rebound in China’s struggling economy has stalled, piling pressure on China's president Xi Jinping to spur growth with stimulus measures.
"Given that the dollar is the world’s largest funding currency, if the price of credit falls, all fixed supply assets like bitcoin and gold will rise in dollar fiat price terms," Hayes wrote.
"The great part about this macro pillar of bullishness is that it doesn’t require Chinese firms and wealthy individuals to buy any bitcoin. The fungible nature of global fiat credit will dictate that the marginal fiat dollar will flow into hard monetary assets like bitcoin."
Meanwhile, an increase in the circulating supply of stablecoins for the first time in over a year could have a similar effect on bitcoin, ethereum, XRP and other cryptocurrencies to central bank money printing.
The number of stablecoins has fallen consistently since May 2022, dropping by over 30%. November is set to be the first over 18 months that's seen an increase in stablecoins, with an increase of 3.4%.
"Increasing the amount of virtual money in the system can result in the same thing as central bank money printing for the financial system," Grzegorz Drozdz, market analyst at Conotoxia, said in emailed comments.
The stablecoin market capitalization dropped from around $200 billion in May 2022 to just over $120 billion at the beginning of this month, according to DeFiLlama data that shows it increased through November.
"The previous lack of new cash to spend could lead to a shortage of funds available for new investment," Drozdz added. "This, in turn, may have caused the market to weaken significantly, as manifested by reduced trading volumes on cryptocurrency exchanges. The current rebound may mark the first influx of new funds into the market in 1.5 years."