Bitcoin's Biggest Bull Isn't 'Long Crypto', He's 'Short Government'

Tyler Durden's picture

Six years ago, Kyle Bass provided a crucial context for the debt-laden world of ever-increasing sovereign debt:

"Buying gold is just buying a put against the idiocy of the political cycle. It's That Simple"

And now, as interest in Bitcoin surges, Arthur Hayes, a former CitiGroup trader who runs BitMEX - a Hong Kong-based crypto exchange - asks an interesting question - In the coming war between digital currencies, which side will your money be on?

As CoinDesk reports, Hayes thinks blockchain is lighting a fuse that will ignite open combat between "true cryptocurrencies" (like bitcoin) and a new "digital fiat" controlled by central banks.

These two parallel currency systems are the inevitable outcome of his core investing thesis:

"A digital society needs digital cash."

In other words, bitcoin has brought the world cryptocurrency and institutions of all kinds will use the technology to their advantage.

Here's what Hayes sees shaking out as a result: Governments will respond to the proliferation of cryptocurrency by withdrawing banknotes from circulation, and governments will issue digital fiat that functions similarly to cryptocurrency.

But don't be fooled, according to Hayes, the similarities here are all on the surface.

Government-controlled digital fiat will be the antithesis of absolutely everything true cryptocurrency stands for. Central bank's issuance of digital money will lead to a brave new world where governments are able to monitor and control every single transaction in an economy.

And countering that overreach is the reason Hayes believes bitcoin and other cryptocurrencies have a value proposition not just today, but for years to come.

When Hayes talks about digital money, he sees the scope of battle on a truly global scale, not just within the U.S., but all across Europe, in China and in India.

What all these country's governments have in common, according to Hayes, is the desire to use digital fiat as a tool of economic control.

He sees digital fiat as an instrument that will allow governments and global central banks to monitor every financial transaction, tax every sale and even lock out people from the payment system if they don't have the right government-issued licenses.

Shifting digital fiat into cryptocurrency, he reasons, will be the only way to preserve privacy. Plus, cryptocurrency will allow individuals and businesses to trade in jurisdictions where parties don't trust electronic fiat – or each other, for that matter – because they know cryptocurrencies cannot be tampered with.

Hayes said:

"If you want to have a financial presence – and not have somebody else know what you're doing at all times – then you'll use a form of cryptocurrency."

A form of cryptocurrency that's true, like bitcoinzcash, monero or dash, he says, is one that offers users both privacy and security.

But there may be limits to the value propositions of even true cryptocurrencies today. For example, Hayes sees small value transactions are out of line with a once resounding narrative in the space, that bitcoin is – and should be – a payment system for consumers. Hayes told CoinDesk:

"I don't think bitcoin is going to replace consumer facing activities, like buying a cup of coffee or buying a magazine at a 7-Eleven."

Hayes called bitcoin's user experience "terrible" for these purchases, because public blockchains are slower than private payment systems. So, for a trip to Starbucks, buying coffee with Apple Pay is a better experience than paying with bitcoin, he contends. It's an interesting observation in that many of bitcoin's strongest proponents tend to envision a world where the cryptocurrency is used for everything. Even still, Hayes is just as bullish on bitcoin, as he continues to reiterate what a fantastic mechanism it is for online international payments and anonymity.

And "those trade flows are massive," he said.

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BaBaBouy's picture

"""A digital society needs digital cash.""" Bitcoinz...

Its a No Brainer, tell your Friends!... Whats can go wrong ???

VD's picture

another crypt0-muppet that either is shilling bitcon as not gov (it is gov created unless you still seriously believe in "Satoshi") or simply does not understand; either way, he is pumping his book.



MANvsMACHINE's picture

and of course, you know.

tmosley's picture

Bitcoin/crypto WILL replace cash for consumer spending. All it takes is a little bit of technological advance and infrastructure investment.

IOTA could probably replace it today. It scales in such a way that the more people use it, the faster the network becomes, thanks to the 2 for 1 "barter" system where each person submitting a new transaction confirms two older ones. This makes transactions free, fast, AND the network gets stronger as a result of any attacks.

Shitonya Serfs's picture

Agere. But only 1 power has the financing/connections to do this (it's not BTC)

Even if BTC is not created to controlled by GOV/FED/Rothschilds...a new "digital fiat" controlled by central banks could be created and implemented much more quickly.

1) Current banks tell all retail vendors, next week, they are only allowed to accept ShekelCoin
2) Banks roll out new payment systems, conversion tables from current FRN to ShekelCoin, and Goy online user interfaces
3) ShekelCoin access info comes to Goy in mail after vendors get their systems
4) Goy is instructed to convert their FRNs to ShekelCoin at current rates, otherwise all FRNs are worthless by the end of the week (remember the snowflake hero FDR did this...they have a map on how to do it again and better)
5) Finally, ShekelCoin is the new accepted crypto and transition took a week-month

This daydream dies:
bitcoin and other cryptocurrencies have a value proposition not just today, but for years to come

Yukon Cornholius's picture

Will Russia, China and Iran be on this system?

tmosley's picture

You need to think harder.

When the government switches the people over to crypto, it removes the bottlenecks to its transfer. It is impossible to keep it from leaving the country, or being exchanged for non-dilutable crypto.

Such a move would be utter suicide on their part.

dasein211's picture

Agreed. Also having the private keys to ledgers kept with one entity is a huge point of weakness.
"Dear US Govt. Your private keys have been stolen. Please send 2billion in biticoin to XYZ address. "
Sincerely, Hackers who just fucked you in the ass.

Shitonya Serfs's picture

You're probably right. The bankers/families controlling money and governments for centuries have nothing to do with this, and will just roll over and let cryptos have their turn.

tmosley's picture

That is very much what happened when the last major ledger based currency was invented. It took them more than 700 years to put in a central bank as an answer, and even then it was only via massive fraud. Fraud which is impossible today.

The Jew does not command the tide.

kochevnik's picture

60 million of my dead countrymen disagree

Shitonya Serfs's picture

Moses would disagree. So would Goolag, FB, all MSM, most bankers, most pols, most government insiders, etc etc etc.

tmosley's picture

Exodus is a lie. The Jews RULED Egypt, and were kicked out for their greed and corruption. Just like in every other country they ever lived in.

Oh regional Indian's picture

TMos is absolutely right on this one, they snuck in and grabbed important things in Egypt (Grain and Livestock) via their financial shennanigens and were Booted out (yet again, or for the first time, who knows)....

sessinpo's picture

The government and wealthy will benefit more then us regular folk. Any benefit regular folk are perceived to receive, rhe wealthy and government will also get. But they have economy of scale. 

asierguti's picture

It scales out well? I don't think so. I have a degree in computer science and I've been working as a software developer with extremely complex distributed systems for many years, and Bitcoin and cryptos are one of the worst solutions I've ever seen. I would be glad to discuss with you any technical point except "you don't know how cryptos work and look at the price, it keeps moving higher".

tmosley's picture

Did your degree in computer science require that you learn how to read?

IOTA is not bitcoin. IOTA scales well. Bitcoin doesn't without major changes (which will happen).

asierguti's picture

bitcoin OR CRYPTOS, I said. Isn't IOTA a blockchain technology based on cryptocurrencies?


I guess you haven't read the whitepaper, right? It was written by a professor called Sergei Popov. This is a guy that has been in academia for the last 20 year. Don't get me wrong, I'm not against professors and lecturers, but theory and practice are really different. Just look at the guys running the Fed based on some mathematical models.


So, according to you, the future is a blockchain created by a group of investors and some professors with theoretical papers who are looking to raise money in an ICO. Good luck.


BTW, regarding the technical implementation of IOTA, I can say that nobody that built huge and complex distributed systems with fault tolerance and low latency properties would choose Javascript or Python. But in a bubble, everything can go up and everything can get funding, like in 1999.

tmosley's picture

>Isn't IOTA a blockchain technology based on cryptocurrencies?


>So, according to you, the future is a blockchain created by a group of investors and some professors with theoretical papers who are looking to raise money in an ICO

The "So" tell for cognative dissonance. Thank you for your concession.

sessinpo's picture

Cognitive dissonance has been a misused catch phrase on ZH, besides being spelled incorrectly.

Secret Weapon's picture

Upvoted you because I learn something from most of your posts.  Thanks. 

StackShinyStuff's picture

fonestar's name is Arthur Hayes?? 

Shitonya Serfs's picture

Fonestar is the Buffett of BTC. He tried to enlighten us all, but now he's laughing from his mom's basement in the new house he bought her.

Bubbles17's picture

Interesting proposition....  Bitcoin created by the gov... I just can't see it...

The central planners's picture

Bravo ZH we need those Bitcoin headlines flowing the whole day.

tmosley's picture

You stop clicking on them, they'll stop posting them.

Nothing's picture

yesterday, despite the fact that the sun is nearing its minimum of radiation and sunspot activity in its 11 year cycle, a solar flare of intensity X9.2 was released, sending a CME giving a glancing blow at earth ... with radiation so intense that it penetrated to ground level.  Only 72 solar events have been this big since 1960.


This one set off some pretty spectacular auroras and quite a bit of static for radio waves.....


Just bear in mind that there have been larger flares, larger CME's than this.  There was an eruption in 1859, often referred to as the "carrington event", which was so intense that telegraph poles caught on fire.  If such an even occurs today, it would "fry" most all of the communicatiions satellites in orbit, including the GPS satelites which our military is 100% dependent on for navigation and for targeting rockets and missiles.

It would destroy most cell phone towers.  It would bring down the power grid, possibly permanently.


It would also wipe out all bitcoins instantly.  Gone.  Poof.


Our government sucks.  But its still not nice to fool Mother Nature.

secretargentman's picture

It's inevitable... Just a matter of time. 

abyssinian's picture

wow, they managed to compare the gold price chart with bitcoin? lol gold went from $1200 to little bit over $1300 while BTC up from $2000 to near $5000. Good job whoever did that, he must be working for the Feds maniuplating data on weekends. lol 

Xibalba's picture

Molon labe...if you can find it. 

BitchesBetterRecognize's picture

Time to abandon the sinking BTC ship    

dasein211's picture

Bitcoin no. Monero, Zcash, Dash yes. And BTW Dash's evolution platform will take on Apple Pay AND micro payments at once. Wallet to wallet on phones, cold storage and web browsers. No one seems to be doing much homework. It's like adding PayPal+Apple Pay+ Bitcoin +Visa all in one.

kochevnik's picture

Jewbucks+PayPal+Apple Pay+Visa = antiquated relics for throwbacks

tmosley's picture

>Dash evolution

This is going to be exciting.

Consuelo's picture



Isn't there a name for what the author alludes to regarding real, anonymous use of Bitcoin...?


Something about the color black and market (?) I think...

Consuelo's picture



And not that I necessarily disagree.    Let real Freedom - which is anonymity by any other name, run free.

magnetosphere's picture

isn't bitmex a small blocker outfit? fck em

Seasmoke's picture

Why not just Gold coins held with a ledger .......simple. 

tmosley's picture

You can't keep physical objects on a ledger. 

Backing is an anachronism. It requires trust. Trust is madness.

RedDwarf's picture

There is a significant % of the human population that, either by programming or evolutionary biology, want to be slaves.  They wish to worship gods, governments, and heroes.  They want to flip over, get their bellies rubbed, and told what good boys and girls they are by the alphas.  They hate and fear trustless systems because if they are not serving others, their world no longer makes sense.

tion's picture

God is great, and leave the girls out of it because of course we want an alpha to roll around with and be pet by have sweet words of approval given by, there is nothing about that to be apologetic for. OTOH getting old alone or forever attached to a beta cuck sounds truly terrible. Gotta have alpha standards though, and swamp dwellers are rotten on the inside.


Tyler how come you opened this one with Nickels and switched to Hayes? Kyle wouldn't go on record? What a punk.

RedDwarf's picture

I said nothing about the girls, you added that in yourself.  Males and females both come in dominant and submissive forms.  I'm talking about how humans evolved to be tribal and heirarchial with many programmed to serve whomever is in charge.

galant's picture

That's sounds too simple, suspiciously like a Gold Standard.

All Gold Standards have been abandoned because of political desire to allow more borrowing --  usually to funds wars.

The Gold Standard ended when governments borrowed heavily to fund World War I, the Bretton Woods system when the US government funded the Vietnam War and ongoing state debt, out of nothing.

With gold, supply cannot be increased on a whim, not by indebted centrals banks or over-stretched governments. 

Gold's millenniums-long history as money is because people have repeatedly reverted to it for one fundamental reason: it is largely outside of the control of politicians. Where governments have interfered, they have eventually failed. 

 Ultimately it's people's preferences which bestow value on anything, not some "inherent value."

Today we see millions of people deeming Bitcoin as valuable. Therefore it has value, and that value is not necessarily inferior to that of gold coins.

Time will tell.




The Forecast Calls for Pain's picture

Cryptos are not as secure as people think.  However, they offer the best chance to people trying to live outside the "mark of the beast".

kochevnik's picture

Most people are not thinking, but copying