BitMEX CEO: Bitcoin's computing power may drop by 30% to 35% after halving, with a target price of US $ 20,000 at the end of the year

Note: The original author is BitMEX CEO Arthur Hayes, who assessed the impact of the new crown epidemic on the global economy and financial markets, and predicted that after Bitcoin halved, the computing power of the entire network will drop by about 30% -35%, and he The expected price of Bitcoin at the end of 2020 is still $ 20,000.

BitMEX CEO:减半后比特币算力或降30%-35%,年底目标价2万美元

Inflation is approaching

Summary: We evaluated the impact of the new crown epidemic on the economy and financial markets. This event will mark a major economic system change, from monetary policy to financial expansion funded by the central bank. In the end, under this new system, there will be a clear winner: inflation. The economic situation may look like the 1970s, and financial markets can hardly tolerate this regime change and inflation. In this environment, Bitcoin can get the most opportunities in its life cycle.

BitMEX CEO:减半后比特币算力或降30%-35%,年底目标价2万美元

(Photo modified from HBO's "Game of Thrones": "The Winter Is Coming-Stark Family"

Central Bank Digital Currency

Summary: We analyzed the idea of ​​Central Bank Digital Currency (CBDC). We divided the concept into two very different ideas: i) ban physical cash, and ii) allow retail customers to deposit directly in the central bank. We have concluded that although these two policies are complementary in some respects, the economic consequences they produce are very different. The former will promote credit expansion, while the latter will cause credit contraction. Due to the deflationary nature of allowing the public to hold electronic deposits in its central bank, we believe that financial regulators are unlikely to allow these CBDC programs to succeed in any meaningful way.

BitMEX CEO:减半后比特币算力或降30%-35%,年底目标价2万美元

Who is funding Bitcoin development?

Summary: We have compiled a list of major organizations and individuals that fund the development of open source Bitcoin and Lightning Network. According to the data we collected, Blockstream and Lightning Labs are the largest contributors to open source development in this area, and in terms of contributions to Bitcoin Core, Chaincode Labs is currently the largest gold developer. We have concluded that the current situation is healthier than before in terms of the availability, transparency and distribution of funds among funders.

BitMEX CEO:减半后比特币算力或降30%-35%,年底目标价2万美元

Mining incentives: the impact of halving

Summary: We evaluated the impact of the block reward halving event that will occur in a few weeks, which will have an impact on Bitcoin mining. Assuming that the price of Bitcoin remains unchanged and excludes the impact of transaction fees, mining revenue should fall by about 50%. However, this is not necessarily the case with network computing power. The decline in network computing power depends not only on the decline in block rewards, but also on the relationship between the difficulty adjustment mechanism and the mining structure . Based on the current industry structure, and then assuming that the bitcoin price remains unchanged, we predict that halving may result in a 30% -35% decrease in the computing power of the Bitcoin network.

BitMEX CEO:减半后比特币算力或降30%-35%,年底目标价2万美元

Shazaam! You snap your fingers, the new crown virus disappears, you can withdraw from the blockade and continue your life. how do you feel? Is it as optimistic as January? Do you believe that ZF will tell you the truth in time, or will it count the data when it suits them? Will you believe the media tells the truth about power? Will you wash your hands frantically every hour, or will you touch your eyes, nose, and mouth randomly?

Suppose, once we get out of the predicament, you can honestly say that everything is back to the beginning of January this year, then we are likely to experience a V-shaped economic recovery. But, as I believe, if your worldview has fundamentally changed, then the imaginary things that support your life have also changed dramatically. When we consider the most important prices, currency prices, and their nature, it becomes crucial to predict what we believe are collective hypotheses.

Currency, the real currency that is disconnected from the practicality of industry, is nothing more than an imaginary thing. It allows us to effectively exchange labor and capital to produce real goods and services. Without this fictional thing … the convenience of modern society will no longer exist. After COVID, the interrelationship between three popular currency hypotheses will completely change.

Government fiat currency, aka USD = hypothetical thing + violence

We know that the US dollar is valuable, because if necessary, the contract and taxes owed will be collected through the barrel of the gun. The value of the US dollar comes from a firm belief that the United States can repay its debts by increasing taxes.

Gold = hypothetical thing + material scarcity

Gold has no extensive industrial uses. It is only shiny, physically scarce, and highly malleable, and has attracted human attention for thousands of years. Therefore, it is valuable.

Bitcoin = hypothetical thing + cryptography is scarce

Bitcoin is valuable because its open source code is run by many people. These people guarantee that the total amount of Bitcoin is limited to 21 million BTC, so it is valuable.

After World War II caused stupid damage to human life, the winners gathered at the Bretton Woods Conference to establish a modern financial system based on the US dollar. Today, we are still under the rule of the dollar.

Until 1971, the value of the US dollar had always been pegged to gold, that is, $ 35 per ounce, and the cunning Dick (Nixon) wanted to fight and distribute gifts at home. "Shit for free, vote for me!" This is the best way to win any election. However, he could not tolerate gold, so he broke the relationship. Since then, the value of the dollar has depended entirely on trust.

Fast forward to January 2020, the United States has the most liquid financial market in the world, and it is completely open to all capital. All major commodities and trade are denominated in US dollars. Therefore, if you are a country or company engaged in international business, you must use these dollars.

When the rhythm is strong, this is great for everyone. The Fed is obliged worldwide to maintain a good and cheap supply of dollars. This is why they have foreign exchange swaps with major central banks. There is a shortage of dollars worldwide, and only the Fed governors who seem to have academic temperament can provide them.

Countries and companies can easily earn dollars by selling gadgets to wealthy Americans. 70% of the US GDP is driven by consumption, it makes the world work, and hundreds of millions of farmers have escaped from extreme poverty, so they can produce cheap iPhones, AirJordans or F150, all of which enable the parent company "USA" to enjoy a record Profit margin.

European consumption is not lagging behind, and the sum of Europe and the United States represents the global demand for commodities. Without them, who would buy these shit in a crazy price increase?

After a hundred years of interruption, Deng Xiaoping's southern tour trip released China's power to the world. After gaining considerable wealth from manufacturing transfers from the West to the East, they began to power the luxury, tourism and education sectors.

Sorry, I am not a modern Thoreau, and of course I do not live by the pond. Simply put: Americans and Europeans are exchanging dollars for what China is selling.

Oh, the new crown virus … China's cessation of the production of anti-virus means that there is no dollar income, and then the Americans and Europeans seized this opportunity and closed their channels, which meant that there was no more demand.

Once China "opens up" business again and starts producing things, there will be no orders from the West because they all watch PornHub at home or place orders at GrubHub. If they do n’t want to eat together and wait for death, they will worry about when their next salary will arrive to pay for the expensive medical expenses. The moral of this story is that China cannot make dollars.

They are not alone, and no major manufacturing or service center can make dollars, but they need dollars to pay for raw materials and repay dollar debt. If their central bank can prove the US dollar, it would be too ridiculous, but, my goodness! They cannot do this.

A small currency collapse occurred at the end of March. The Fed's response was to provide swaps to more central banks, but it excluded China. This relieves a little pressure, but please take a look at the spread of CDX EM HY CDS, which looks like a fluffy hairstyle in the style of West Hollywood.

The traditional view is that the Fed can keep printing money until the dollar becomes cheap enough. But Bank of America tends to hoard dollars and refuses to lend. There are various regulatory reasons that prevent them from doing so, and why they should take risks during the global depression. For safety, it is best to ensure that the balance sheet is rock solid.

To put it simply, the Fed can print as many dollars as needed, but the companies and countries that need it most are not available, and one of the most important countries is China.

With the exception of the United States, no other country can choose to devalue its currency to the extent necessary to produce a certain degree of economic activity. Remember, all raw material commodities are denominated in US dollars. If you print too much currency and cannot monetize government debt, then inflation will be rampant. At this time, the Jacobins will flock to the streets, and you better not show up in front of them.

The above summarizes how I view the next ten years. I do n’t know the exact time, but a strong dollar will break the backing of the global economy and force it to restart. The question is, what will the new system look like?

Through my portfolio, you can spy on my soul:

  1. Buy USDCNH 2-year call option with a target price of 8.00
  2. Buy USDKRW 1-year call option with a target price of 1600
  3. See more CDX EM CDSI Sprd (I have not opened a position yet, but I am waiting for the market to rebound)

Central banks will depreciate hard digital assets. What is the digital asset? I do n’t know, but it may be linked to Bitcoin.

The era of the dollar is over, it is time to change a new spiritual pillar.

Do you believe that physics or cryptography is scarce?

Traditionally, when the dollar strengthens, investors expect gold or bitcoin prices to weaken, but public trust in the dollar will eventually disappear. Gold is the best choice in history, and it is also widely owned by the central bank. The best way to devalue a currency is to let the price of gold reach extremely high levels. This happened during the oil crisis in the 1970s, when the Fed raised interest rates to a level where it became foolish to own gold when you could get a 20% investment income on US government bonds.

This time, the Fed cannot raise interest rates. This will undermine the fiscal position of the US government, because the US government must provide benefits to everyone. American voters will not tolerate another bailout program specifically for financial services. They will be paid to sit at home, watch NetFlix (aka "Tiger King"), and avoid using assault rifles to launch modern whiskey riots.

Therefore, with the collapse of the Bretton Woods system, no alternative asset can attract people away from gold. The stock market in Freedom will become a political tool. The US Treasury, backed by the Federal Reserve, will buy all government and corporate debt. They will buy stocks and they will buy consumer loans. You might think that if the government buys the index, then stocks are a good place. However, let us recall the Nikkei index of 1989. The Bank of Japan currently holds more than 30% of the Japanese stock market, while the Nikkei index is still 50% below the highest value. I'm just trying to use the BOJ's balance sheet to illustrate this matter …

The once powerful U.S. stock market will become a corral for zombies, companies that are inextricably linked to American taxpayers. If inflation can be controlled, it will naturally not be so bad. However, as the world recovers, we have an unlimited amount of fiat currency that will chase a limited supply of actual commodities. SMEs account for 60% -80% of most countries / regions. Due to their small size and limited network, these companies have to pay a high price even if they can obtain credit. Even with all the well-intentioned government SME loan programs, when they can actually obtain funds, a large number of SMEs will no longer exist. Because complex systems cannot be recovered in a linear manner.

Therefore, unlimited financial and monetary assistance will chase the non-existent supply, which will lead to inflation. The global stock market will also become a political tool rather than an efficient capital allocator. This will send the wrong signal and produce the wrong product. Can those hipsters tolerate a toast worth $ 40 that is crushed?

To date, gold, the best inflation hedging tool in human civilization, will be repriced. If you believe in illusion + physical scarcity, this is the only thing worth having, how high can it fly? This depends on the ratio of total credit to base currency, which can be used as a guide for the future direction of gold.

Another possible result is the creation of a non-dollar-led digital financial system.

"If they dare to stand in front of citizens and defend the [dollar] standard is a good thing, we will do our best to fight them, backed by the production masses in the world. With commercial interests, labor interests and the support of all working masses , We are going to tell them, do n’t put this crown of thorns on the forehead of laborers, you should n’t nail humans on the cross of the dollar. ”

—— Suppose Satoshi Nakamoto speaks at the 2020 Democratic Congress Will a group of central banks use digital cryptocurrencies to reset the monetary base? Perhaps. Will a basket of digital fiat currencies allow the central bank to hold a sufficient amount of gold? Perhaps.

I only know that Bitcoin is the hardest digital currency, there is no one. All methods of trust have disappeared. In order to solve the destruction of demand and supply, governments will embark on the world's largest fiscal stimulus plan ever. It will not be paid through tax receipts, nor will it be paid by printing presses because 30% of the population is unemployed. More importantly, in order to directly hand over money to the people, the government will have to digitize its currency. This will educate the public to use digital currency. Once they understand the legal digital currency, they will look for a hard version to avoid the ravages of inflation.


In the storm of global margin calls, the market will find leverage and punish it, and all liquid assets will be sold to finance illiquid assets.

In this storm, correlation = 1.

The reason why every asset class is hit is that weak-hand investors use leverage to strengthen their short-term volatility strategies.

BitMEX's open positions were reduced by half, and leveraged traders suffered liquidation. Like all other asset classes, leverage is also punished. However, relatively speaking, the first quarter of Bitcoin still outperformed the S & P 500 index, and its correlation with SPX also reached a local high.

Leverage was partially eliminated when the market fell, BitMEX XBTUSD open positions are slowly rebuilding, and as traders gain support and adjustments to inflation expectations, the search for hedging inflation will be seriously undertaken.

This is the first scene of global rebalancing. The price distortions caused by leverage will be used. As for whether you lose or win, you will be at your own risk.

Bitcoin will be owned by unleveraged people. Will its price return to $ 3,000? It is absolutely possible. With the S & P 500 index testing again at 2,000 points, all asset classes are expected to vomit again. However, my price expectation for Bitcoin at the end of 2020 is still $ 20,000.

Everyone knows that this shift is imminent, which is why central bank governors and politicians will put all their tools on this issue. I want to reiterate that this is about inflation, because more fiat currency will chase one unit to reduce the supply of real goods and labor. During the transition to the new system, there are only two things worth owning: gold and bitcoin.

If you think my mouth is full of shit, or think I am an outright murderer, remember your views before and after COVID, can your mental model stay in January 2020?