• BitMEX co-founder Arthur Hayes published an essay on Thursday outlining potential scenarios that could cause a spike in oil prices.
• Hayes argued that such a scenario could spur central banks across the world to return to a market-friendly loose monetary policy.
• He described three possible futures—escalation of conflict between Iran and Israel/Saudi Arabia, reduction of oil production by large producers, or sabotage of oil/gas infrastructure—that could lead to an oil supply shortage.
The Potential Oil Crisis
Arthur Hayes, co-founder of BitMEX, recently published an essay outlining realistic potential situations that could cause a dramatic increase in global energy prices and make Bitcoin’s price skyrocket as a result. He determined that such an event would likely be driven by an escalation of the conflict between Iran and Israel/Saudi Arabia, which would result in the closure of the Strait of Hormuz – one of the world’s largest oil chokepoints – reducing 17 million barrels per day from global markets.
Central Bank Monetary Policy
In his post titled “Curve Ball,” Hayes argued that this situation would likely spur central banks across the world – including the Federal Reserve – to return to a market-friendly loose monetary policy. This would mean lower interest rates and quantitative easing programs which are generally seen as positive for Bitcoin’s price due to their inflationary effects on fiat currencies.
Potential Scenarios
Hayes proposed three potential scenarios that could lead to an oil supply shortage: escalation of conflict between Iran and Israel/Saudi Arabia; reduction of oil production by large producers; or sabotage of critical oil/gas infrastructure. All three scenarios present significant risks with potentially catastrophic consequences if they were realized, but it is important for investors to consider how their portfolios may be affected by such events.
Trading Bitcoin During A Crisis
Hayes also provided some insight into how traders should approach trading Bitcoin during such a crisis situation: “Be prepared mentally before shit hits the fan… Buy low and sell high works until it doesn’t.” He also noted that traders should not get caught up in short term swings but instead focus on longer term trends when trying to capitalize on these types of events.
Conclusion
As geopolitical tensions continue to mount across the globe, it is important for investors to be aware of potential risks posed by energy supply shortages or other events which may significantly impact global markets. By following Hayes’ advice and utilizing sound risk management strategies, traders can position themselves well if any one (or all) of these scenarios come true in the near future.