Chinese monetary expansion could potentially drive wealthy investors to Bitcoin. If such a trend materializes, it will end up repeating 2015’s pattern of post-yuan-devaluation cryptocurrency growth.
Arthur Hayes, the co-founder of BitMEX, predicts a significant surge in Bitcoin’s value driven by this monetary policy shift.
Bitcoin As Hedge
In his recent blog post, Hayes argues that despite official restrictions, cryptocurrency trading continues to thrive in mainland China through peer-to-peer networks on major exchanges like Binance, OKX, and Bybit. He points to Bitcoin’s historical outperformance of traditional assets during periods of monetary expansion, citing the dramatic rise from $135 to $600 in late 2015 following a yuan devaluation.
While Chinese authorities have banned direct Bitcoin/CNY trading pairs, Hayes suggests this was merely to prevent Bitcoin from serving as a visible indicator of currency debasement, noting that crypto ownership itself remains legal in China.
Looking ahead, Hayes anticipates that China’s expected monetary expansion and “reflation” efforts will drive wealthy local investors toward Bitcoin as a hedge against currency devaluation. Despite this bullish forecast, Hayes acknowledged that this transition may take time. His analysis even suggests that the initial Chinese investor response has focused on domestic equities and discounted real estate, but he expects attention to shift to Bitcoin as monetary effects become more apparent.
However, Hayes predicts that mainland Chinese investors will likely be restricted from accessing Hong Kong’s Bitcoin ETFs, which would then force them to rely on existing peer-to-peer networks for cryptocurrency exposure.
China’s New Debt Package
Hayes’ commentary comes amidst reports that China’s markets may see a significant boost as authorities consider injecting 10 trillion yuan, which is worth around $1.4 trillion, into the economy through debt issuance.
The massive stimulus package, including 6 trillion yuan in special sovereign bonds, is expected to receive approval from top legislators in the first week of November. The fiscal package, aimed at reviving China’s struggling economy, could be improved if Donald Trump secures the US presidency.
