Legendary trader and BitMEX founder Arthur Hayes likened the "persistent weak layer" in the snow layer to the current tensions between Israel and Iran, and believed that once the Middle East war escalates, it may trigger an avalanche effect in the financial market, affecting energy prices and supply chain stability. . But he emphasized that history has proven that gold and Bitcoin are anti-inflationary. Although Bitcoin is bullish in the long-term trend, he called for caution in short-term fluctuations. If you also want to dig deep in the currency circle and want to maximize your investment returns, but you can't recognize the market, then no matter how good the opportunity is, it has nothing to do with you. Follow me on the homepage, and I will share spot passwords, bull market layout strategies, and 100-fold potential coins for free every day!

Hayes pointed out in a blog post that the geopolitical situation in the Middle East after World War II is the foundation of the current global order, and that the triggering of wars and other uncertainties are usually related to Israel. He then mentioned that wars usually push up inflation, and as the United States continues to borrow money to buy weapons for Israel, the supply of US dollars may increase, thereby increasing the value of inflation-resistant assets such as Bitcoin.

He said that since its launch, Bitcoin has performed well in the growth of the Federal Reserve's balance sheet. The current situation in the Middle East may further push up energy prices and strengthen Bitcoin's position as a "digital reserve" asset.

He went on to add that the current war between Israel and Iran is seen as a proxy war between the United States, Europe, China and Russia, and will not expand the scope of the war to other regions. China and Russia may be potential allies of Iran, but they are limited to material support and will not directly participate in the war. He believes that China may see this as an opportunity to expand the "Belt and Road Initiative". Assuming that the Iranian regime will support China to further expand its economic territory and utilize Iran's minerals and energy due to the reorganization after the war.

He proposed two key scenarios when analyzing the impact of the Middle East conflict on the market:

1. Small-scale conflicts: The impact is limited and will not cause a major impact on the market;

2. A full-scale escalation of the conflict: This could trigger a market avalanche effect. Iran currently accounts for about 7% of the world’s Bitcoin mining power. Even if mining facilities are damaged, the impact on the long-term price of Bitcoin will be relatively small.

He explained that when energy costs rise, all miners will face the same pressure and try to find ways to keep mining profits stable. In addition, the Bitcoin network is designed with self-regulation capabilities, and the difficulty of mining will be adjusted as the computing power changes, ensuring that there are still mining profits under energy price fluctuations.

Against the backdrop of rising energy prices, the value of Bitcoin as a "digital reserve asset" may also rise, similar to gold's anti-inflation performance during the oil crisis, making it more scarce and has greater potential for value preservation.

Hayes cited historical events to demonstrate the anti-inflation properties of gold and Bitcoin.

In 1973, Arab countries imposed an oil embargo on the United States because of its support for Israel in the Yom Kippur War, causing oil prices to soar.

The Iranian Revolution in 1979 overthrew the Western-backed Saudi Arabian regime and withdrew Iran's oil supplies from the international market, tightening the global oil market supply.

The chart below is a chart of crude oil and gold from 1973 to 1979, with spot crude oil (white) and gold prices against the US dollar, indexed to 100 as a base. Over time, the price of oil rose 412%, while the price of gold came close to that, rising 380%.

The chart below shows the price of gold (expressed in terms of gold's purchasing power) and the S&P 500 (in red) relative to the price of oil, indexed to 100 as a benchmark. Gold only buys 7% less oil, while stocks buy 80% less oil, indicating that when oil prices are high, the relative purchasing power of the S&P 500 is greatly weakened, and its performance is far less stable than gold.

Hayes said that the United States has long expressed support for Israel's military actions in the Middle East, regardless of whether they are controversial or not. This support is mainly reflected in military aid. Since Israel cannot afford the huge military expenses, the US government provides Israel with the weapons it needs through loans.

He further said that Israel has received about $17.9 billion in military aid since October 7, 2023. This debt-dependent model puts greater financial pressure on the United States and requires more sources of funds. Due to the low domestic savings rate, the Federal Reserve is often required to take on these debts and expand its balance sheet to support the debt issued by the government.

He said this operating mode is similar to the 2008 financial crisis and the COVID-19 pandemic, when the Federal Reserve also printed a large amount of money to buy Treasury bonds, resulting in the dilution of the value of the US dollar and increasing inflation risks.

Hayes continued that if the situation in the Middle East intensifies, leading to rising energy prices, the Federal Reserve will print more money, and Bitcoin and other cryptocurrencies may become safe-haven assets, leading to a new wave of increases.

Take the following chart as an example, the price of Bitcoin is relative to the Federal Reserve's balance sheet, and is indexed to 100 as the base point. The cumulative increase of Bitcoin since its creation has reached 25,000%, far exceeding the growth of the Federal Reserve's balance sheet, showing that Bitcoin has a strong ability to resist inflation when the money supply increases, and is regarded as a high-quality anti-inflation asset.

Hayes said that although Bitcoin is bullish in the long term, price volatility cannot be ignored. The conflict between Israel and Iran made him realize that holding too much memecoin may bring greater risks in a short-term unstable environment, so he decided to reduce his position to cope with potential losses.

At the same time, Hayes suggested that in the current inflationary environment and geopolitical turmoil, assets should be allocated to assets that fight against the depreciation of fiat currencies, such as Bitcoin or other assets that can maintain value. In the face of uncertainty, it is necessary to avoid trading based on personal positions on the war, and focus on protecting the purchasing power of one's own capital to cope with possible future economic shocks.