On 4 November 2022, Arthur Hayes, Co-Founder and former CEO of BitMEX, said that the programmability of central bank digital currencies (CBDCs) could take away “the ability to purchase Bitcoin”.

In a blog post published two days ago, Hayes explained the difference between CBDCs and the current forms of electronic cash:

A CBDC is government issued digital currency (i.e., digital cash) that exists purely in electronic form and allows you to defy the above physics lesson. It is base money just like physical cash — a liability of the central bank. This is different from the electronic money you are familiar with, which rides on the traditional commercial bank rails. That money — created by the banking system through loans — is made-up credit money, rather than a direct liability of the central bank (a la cold, hard cash).

The other big difference between CBDC’s and current electronic cash is that, due to the innovations afforded by blockchain technology, the government can program their CBDCs to be 100% under their control. It’s this additional level of control that will enable them to solve their two-pronged inflation problem.

He then talked about private fiat-backed stablecoins and why they were doomed:

The reason why stablecoins exist and are popular is because there is no competing CBDC. Should the Federal Reserve roll out FedCoin, there will be very little reason to use any of these solutions, as the FedCoin will be backed by the government and can never go bankrupt.

He ended his blog post by saying:

I am also optimistic because today I still have the ability to buy the supreme antidote: Bitcoin. This window won’t last forever. Capital controls are coming, and when all money is digital and certain transactions are not allowed, the ability to purchase Bitcoin will quickly vanish. If any of this doom porn resonates with you and you don’t own at least a very small % of your liquid net worth in Bitcoin, the best day to have bought Bitcoin was yesterday.

In a recent interview, the former BitMEX CEO talked about how he selects potential winners for the next bull cycle in the crypto market.

According to a report by The Daily Hodl, during an interview with Real Vision Founder and CEO Raoul Pal that was recorded on 22 September 2022, Hayes said:

“I guess you use survivorship bias. If I’m looking at a top 20 market cap asset and it’s down 95%, will it survive to the next cycle? Will it survive the next two years? How much money did they raise? If the answer is yes, buy it... Worst case, it goes down to zero. Best case, goes up with 10x or 20x. If it went from 100 to one and it goes from one to 10, it’s a 10x. Still isn’t anywhere near where it was, but I’m just playing the rebound.

So you know that on the rebound of crypto, when the next cycle begins, everything that fell the most is going to rise the most just by the path dependency of how returns work. And so, I guess this doesn’t change in most of these things. Most of them will fail, you don’t really care. It’s really just a numbers game.

In a blog post published on 23 September 2022, Hayes talked about how he expects the Ethereum ($ETH) price to change in the next few months:

As I have said in various interviews, the only thing that I believe matters in the short term (i.e., the next three to six months) is how ETH issuance per block falls under the new Proof-of-Stake model. In the few days post-merge, the rate of ETH emissions has dropped on average from a +13,000 ETH per day to -100 ETH.

The price of ETH continues to get smoked due to deteriorating USD liquidity, but give the changes in the supply and demand dynamics time to percolate. Check back in a few months, and I suspect you’ll see that the dramatic reduction in supply has created a strong and rising floor on the price.

I wrote previously that I purchased $3,000 strike ETH/USD December 2022 call options. I fear I might not have enough time left to get into the money on those options…

Is the removal of almost $2 billion in sell pressure enough to cause the price to more than double in a little over three months from now? If my USD liquidity index turns higher, then maybe I stand a chance. But hope is not an investment strategy. I most likely overestimated how quickly the reduction in supply would translate into higher ETH fiat prices.

Versus Bitcoin, I am confident that ETH will continue to outperform. The cleaner trade would have been to buy options on the ETH/BTC cross. But I already had that position in the physical, and I like trading, so I went for it.

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Featured Image via Pixabay