December 19, 2024
BitMEX CEO Arthur Hayes suggests that the Trump administration should move away from the gold standard and lean more toward creating a strategic reserve of Bitcoin.
Hayes suggests that the best way for the United States to achieve economic prosperity is for the Treasury to create more dollars by lowering the price of gold to build up a reserve of Bitcoin.
Hayes suggests Trump move off gold standard
According to Hayes’ latest article on Substack, this reduction will allow the Federal Reserve’s Treasury General Account (TGA) to receive dollar credit.
This credit can then be injected directly into the economy. It eliminates the need for diplomatic efforts to persuade other countries to devalue their currencies against the US dollar. The greater the devaluation of gold, the greater the credit.
Currently, the Treasury values gold at $42.22/oz. In Hayes’s view, this is overvalued. He explains that if incoming Treasury Secretary Scott Bessent were to consider a revaluation of $10,000 to $20,000/oz, the TGA’s balance would grow immediately.
“A rapid and significant weakening of the dollar is the first step toward Trump and Bessent achieving their economic goals,” Hayes wrote. “It’s also something they could achieve overnight without consulting domestic lawmakers or foreign treasury chiefs. Given that Trump has a year to show progress on some of his goals to help Republicans maintain control of the House and Senate, my base case is for a $/gold devaluation in the first half of 2025.”
Arthur Hayes argues that the strategy would substantially increase the price of Bitcoin and other cryptocurrencies if the Treasury decided to use dollar credits to buy BTC.
Since the United States already owns the largest amount of gold of any country, it could do the same by creating a Bitcoin reserve. This would then confirm the country’s financial supremacy in terms of ownership of the world’s most powerful digital asset.
Since the industry widely considers Bitcoin to be hard money due to its fixed supply cap, Hayes argues that the strongest government currency would be the one whose central bank holds the largest BTC reserve.
“If the U.S. government creates more dollars by devaluing gold and uses some of those dollars to buy bitcoin, its fiat price will rise,” Hayes wrote in his article. “This in turn will stimulate competitive sovereign purchases by other countries that must follow the U.S. in. Bitcoin’s price will then rise indefinitely, because why would anyone sell bitcoin and take delivery of fiat currency, which the government is actively devaluing?”
Japanese lawmakers made similar proposals earlier this month, and the city of Vancouver, Canada, has already approved a bitcoin reserve plan for its city council. So it’s likely that if the U.S. doesn’t act soon, its international rivals will.
However, realistically, Hayes does not expect the Treasury to buy Bitcoin. However, devaluing gold will create dollars anyway, which can be reintroduced into the economy as goods and services or used as financial assets.
Hayes’ sentiments are consistent with market statistics, as Bitcoin ETFs currently have more assets under management than gold ETFs, and these funds have been trading for less than a year.
How much time does Trump have?
Hayes expressed concern about high expectations among crypto investors about how quickly the incoming Trump administration can implement changes that will benefit the crypto market.
Expect Trump to need at least a year to address key domestic and international issues.
At the same time, the president-elect will need to show results almost immediately, since most lawmakers will begin campaigning for the midterm elections just a year after Trump's inauguration.
If patience runs out and sentiment turns negative quickly, Hayes expects there to be regret among investors.
“The market will immediately wake up to the fact that Trump has at best a year to implement any policy changes on or around January 20. This realization will lead to a massive sell-off in cryptocurrencies and other Trump 2.0-related equity trades,” he said.
Hayes points out that devaluing gold is the most time-efficient way to generate money and stimulate the economy because Trump has little time to make a change.
“People are impatient because they are desperate,” he said. “Trump is a smart politician and he knows his base. To me, that means he has to go big early, which is why I’m betting on a big devaluation of the dollar against gold in his first 100 days. It’s an easy way to make production costs globally competitive in America quickly.”
Hayes isn’t alone in this view. Last month, Republican Senator Lummis also suggested that the Fed sell some of its gold to buy 1 million bitcoins and fund a bitcoin reserve.