• Arthur Hayes, co-founder of BitMEX, published an essay on Thursday discussing potential situations that could lead to a global oil supply shortage.
• These scenarios include Iran closing the Strait of Hormuz, large oil producers materially reducing their production, and critical oil/gas infrastructure taken offline due to sabotage.
• Such a scenario would cause central banks across the world to return to a market-friendly loose monetary policy and make Bitcoin’s price skyrocket as a result.
Oil Supply Shortage
Arthur Hayes, co-founder of BitMEX published an essay on Thursday outlining „realistic potential situations“ that could lead to an oil supply shortage across the globe given current geopolitical tensions. The former CEO argued that such a scenario would cause central banks across the world – including the Federal Reserve – to return to a market-friendly loose monetary policy and make Bitcoin’s price skyrocket as a result.
Hayes described three possible futures that could lead to an oil supply shortage: Iran escalating its conflict with Israel/ Saudi Arabia by closing the Strait of Hormuz, large oil producers (Russia, Saudi Arabia, etc) materially reducing their production, or critical oil/gas infrastructure being taken offline due to deliberate sabotage. According to Hayes, the first scenario is most likely since Iran’s Uranium enrichment could motivate Israel and Saudi Arabi to take military action against them. By closing the Strait of Hormuz, 17.3 million barrels per day would be removed from global markets making marginal costs per barrel extremely high.
Such incidents would have catastrophic economic impacts for countries dependent on imported energy resources such as Japan and India. Additionally it would have serious implications for transportation industries in Europe and North America who rely heavily on gasoline powered vehicles and diesel fuel for commercial transport services such as shipping companies or airlines which are already struggling with rising fuel prices dueto COVID-19 travel restrictions.
In order to combat these economic repercussions caused by soaring energy prices in international markets central banks around the world may be forced into returning towards more accommodative policies such as quantitative easing (QE). This type of policy aims at increasing money supply through buying bonds from financial institutions in order maintain low interest rates while attempting stimulate economic activity through increased liquidity in financial markets which can ultimately increase inflationary pressures causing currencies like US dollars devalue significantly over time if left unchecked for extended periods of time .
Bitcoin Price Surge
The influx of new money into financial markets has caused investors flock away from traditional investment classes such as stocks bonds or commodities towards digital assets which provide investors with protection against inflationary pressures associated with QE programs . As result cryptocurrencies like Bitcoin tend experience significant gains when central bank policies become increasingly accommodative since they are not subject same regulatory constraints normal fiat currencies are subjected too .