Arthur Hayes, former head of the cryptocurrency exchange BitMEX, explores the relationship between the monetary policies of the United States and China and the dynamics of the Bitcoin market in his new essay “Long Live the King!” He also reveals the reasons behind the diminishing relevance of the traditional four-year cryptocurrency cycle.
This is reported by Finway
“Bitcoin is the best form of money ever created by humanity. Like any currency, it has a relative value, and since the global economy still relies on Pax Americana and the US dollar, Bitcoin is valued in relation to the dollar. Therefore, its price will fluctuate based on the value and volume of fiat currency.”
According to Hayes, it is the level of dollar liquidity and regulatory policy that will determine the future of the crypto market. He traced how changes in the availability and volume of the dollar and yuan have influenced the growth phases of the first cryptocurrency, noting that regulators are preparing for a shift towards softer economic measures. The author believes that Bitcoin’s market cycles no longer adhere to the former four-year pattern due to the transformation of the global monetary system.
Main Bitcoin Cycles: From Genesis to Pandemic
The first Bitcoin development cycle began in 2009 with the creation of the genesis block during the global financial crisis. At that time, the US Federal Reserve was implementing a policy of quantitative easing, while China stimulated its economy with large-scale credit programs. By 2013, both countries began to restrict the money supply, which affected the end of Bitcoin’s first bull trend.
The second cycle coincided with the launch of Ethereum and the surge of ICO projects. During this period, from 2013 to 2017, the excess of Chinese yuan played a crucial role. It was the sharp increase in credit impulse in China, despite the contraction of dollar liquidity, that triggered Bitcoin’s rapid growth. However, by the end of 2017, with the tightening of the Fed’s policy and the slowdown in credit expansion in China, the market again entered a downturn.
During the COVID-19 pandemic, from 2017 to 2021, the US, under Donald Trump’s leadership, rolled out unprecedented economic stimulus programs. Trillions of dollars flowed into the financial system, leading to a significant increase in Bitcoin’s value. In contrast, in China, the scale of support was limited, and the authorities began a policy of curbing excessive inflation in the real estate market.
Current Stage: New Market Drivers and the Role of Regulators
Since 2021, according to Hayes, the world has entered a phase of changing economic dominance, accompanied by financial turbulence and a search for new stimulus tools. One of the key sources of liquidity has been the Fed’s reverse repo program, which allowed the US government to free up billions of dollars to support the market through the issuance of short-term bonds. At the same time, China faced deflationary trends and tightened its policy to restrain the growth of asset values, maintaining a course to reduce the role of real estate in the economy.
Despite these challenges, recent actions and rhetoric from regulators indicate a readiness for changes in monetary policy. US President Donald Trump is calling for an “economic warm-up,” believing that GDP growth will help reduce the debt burden. His criticism of the Fed’s excessive tightness has already influenced the regulator’s policy: in September, a new cycle of rate cuts began, even amid inflation exceeding target levels.
According to Hayes, Bitcoin’s dynamics increasingly depend on global liquidity and government decisions rather than established cycles. The flexibility of the monetary policies of the US and China will determine the future of the crypto market in the coming years.