Hayes' Core Thesis
Arthur Hayes contends that a deeper US conflict with Iran could ultimately form a bullish macro setup for Bitcoin. This stems not from war benefiting markets directly, but from potential Federal Reserve moves toward cheaper and more abundant money amid political and fiscal pressures.
Why Bitcoin Could Surge
In his March 2 essay 'iOS Warfare' on cryptohayes.substack.com, the BitMEX co-founder outlines that if President Donald Trump commits to a prolonged and expensive campaign against Iran, it raises odds of monetary easing. For Hayes, this outweighs the conflict itself. He emphasizes the fiscal burden of such engagements.
The longer Trump engages in the extremely costly activity of Iranian nation-building, the higher the likelihood the Fed lowers the price and increases the quantity of money to support Pax Americana’s latest bout of Middle Eastern adventurism.
Historical Precedents
Hayes bases his view on patterns from prior US military actions in the Middle East, where major conflicts coincided with or preceded easier monetary policy. Wars strain public finances and confidence, providing the Fed cover to cut rates, boost liquidity, and stabilize assets. He references episodes from 1990 onward, including the Gulf War where the Fed signaled potential easing amid uncertainties.
The heightened uncertainties and the prospectively less satisfactory performance of the economy stemming from events in the Middle East had greatly complicated the formulation of an effective monetary policy. In the opinion of several members, events appeared likely to unfold in a direction that would require an easing of policy at some point to counter weakening tendencies in the economy that had been in train before the oil price increase.
It’s clear that the events of last week, at a minimum, have created a heightened degree of fear and uncertainty that is placing considerable downward pressure on asset prices, increasing the probability of an asset price deflation, with its obvious impact on the economy. Therefore, I propose a 50-basis point cut in the federal funds rate target.
Cautious Positioning
Hayes views geopolitical shocks as potential monetary catalysts, with lower rates and liquidity favoring Bitcoin. However, he advises against immediate risk-on trades, as markets lack clarity on commitment duration or tolerance for pain. The cleaner approach is waiting for policy confirmation. At press time, Bitcoin traded at $66,218.
The prudent action is to wait and see. The time to back up the truck and buy Bitcoin and high-quality shitcoins like HYPE is immediately after the Fed cuts rates and/or prints money to support the government’s goals in Iran.
