• Arthur Hayes, co-founder of BitMEX, published an essay outlining scenarios that could make oil prices rise and Bitcoin’s price skyrocket.
• He suggests that this could be caused by conflicts in the Middle East, reducing oil production from large producers or sabotaging key oil infrastructure.
• Hayes believes that a potential closure of the Strait of Hormuz by Iran would be most likely to happen and would cause a major decrease in global oil supply.
Arthur Hayes: Bitcoin Price Could Skyrocket During Potential Oil Crisis
Arthur Hayes, co-founder of BitMEX, published an essay on Thursday outlining “realistic potential situations” that could make oil prices boom and make Bitcoin’s price skyrocket as a result. In his blog post titled “Curve Ball,” he described three possible futures that could lead to an oil supply shortage across the globe given the current state of geopolitical tensions.
Potential Conflicts in Middle East
Hayes suggested that Iran could escalate its conflict with Israel/Saudi Arabia by closing the Strait of Hormuz – one of the world’s largest oil chokepoints between the Persian Gulf and the Gulf of Oman. Alternatively, large oil producers (Russia, Saudi Arabia etc.) could materially reduce their oil production or critical oil/gas infrastructure could be taken offline due to “deliberate sabotage.”
Most Likely Scenario
Hayes determined that a closure of the Strait by Iran would be most likely since its Uranium enrichment program has motivated Israel and Saudi Arabi to take military action against it. By closing down this chokepoint, Iran would remove a whopping 17.3 million barrels per day from global markets which would consequently make marginal cost per barrel extremely expensive.
Central Banks Forced To Loosen Monetary Policy
In this case scenario, Arthur Hayes argued that central banks across the world – including The Federal Reserve – will have no other option than returning to market friendly loose monetary policy in order to avoid economic recession or depression due to high energy prices from low global supply. This move is expected to benefit Bitcoin significantly as investors will seek alternative assets such as digital currencies during times where traditional financial instruments are not performing well due to inflation caused by central banks’ loose policies.
Given current geopolitical tensions in Middle East and potential scenarios outlined by Arthur Hayes in his article “Curve Ball”, it is very possible for us to witness an increase in global energy prices which might force central banks into loosening monetary policy thus creating an environment beneficial for bitcoin investment while being detrimental for traditional financial instruments due inflation driven by loose policies followed by central banks