Historical economic trends suggest Bitcoin is fated for another massive leg up this market cycle, according to BitMEX co-founder Arthur Hayes.

While Bitcoin has traded mostly flat over the past several months, Hayes says he’s confident that the leading crypto asset will “regain its mojo” thanks to the overwhelming U.S. government spending and money printing of the modern era.

The Local Inflationary Period

The popular crypto essayist broke economic history down into two basic periods: local inflationary periods, and global deflationary ones. Since 2008, he claims the United States has been steeped in the latter after the nation turned to quantitative easing to quell the financial crisis.

“In a local period, the authorities financially repressed savers to fund past and present wars,” Hayes explained. “In a global period, finance is deregulated, and global trade is promoted.”

Generally speaking, Hayes said that it’s wise to hold gold during local inflationary periods especially when you’ve lost faith in both the “system” and “those governing it.”

However, the start of the current economic era was also marked by Bitcoin’s genesis block in 2009, which introduced a currency that improved on all of gold’s qualities. Not only is the currency limited in supply, but it also “moves at the speed of light” much like digital fiat currencies. “That is why Bitcoin stole some of gold’s thunder from 2009 until the present,” he said.

Too Much Credit For A Recession, Says Arthur Hayes

While the Federal Reserve has raised interest rates and reduced its balance sheet over the past two years, Hayes said that the amount of credit in the economy is still expanding in other ways. These negate the central bank’s anti-inflationary measures and continue to boost the value of Bitcoin and other assets

“You now must obsessively observe the amount of credit created by commercial banks,” he explained. Much of this credit is related to fiscal deficits, which are funded through government debt that commercial banks “will dutifully purchase.”

Hayes cited an update from the Congressional Budget Office last month projecting the budget deficit to reach $1.915 trillion in fiscal year 2024 – the highest level ever besides the Covid-19 era. Meanwhile, the Atlanta Fed projects real U.S. GDP growth to be 2.7% in Q3 2024, quelling any fears of a potential recession in the short term.

“I’m pointing this out because I believe fiscal and monetary conditions are loose and will continue to be loose, and therefore, hodl’ing crypto is the best way to preserve wealth,” Hayes concluded.