Arthur Hayes Bets Big On Chinese Money Coming to Bitcoin

Summary

Bitcoin, the world's most widely traded cryptocurrency, will soon see another wave of growth — and much of it will be fueled by funds coming from China. Despite the official Chinese government prohibition against crypto trading and mining, all signs are apparent that Chinese deep-pocketed investors are quietly looking for alternatives to protect their funds, especially at this stage of economic downturn.

China's economy is also afflicted with some issues: a slowing property market, falling share prices, and a weakening yuan (its currency). Meanwhile, the government has also made it harder for people to send their money abroad. This has frightened numerous investors into fearing for the safety of their deposits.

So, others are turning to Bitcoin — a virtual, decentralized asset owned and controlled by no government. There is only a limited amount of Bitcoin available, it is easy to keep in digital form, and it is seen by many to be a safe store of value during uncertain times.

Introduction

Arthur Hayes, one of the very popular co-founder and former chief executive of BitMEX, is once again at the center of controversy in the crypto world. This time, he's betting a lot of money — not just on Bitcoin, but also on an incredibly powerful source of funds set to enter the crypto universe in the near future: China. According to Hayes, the next wave of enormous Bitcoin investment is in Chinese investors, and it will drive the price of Bitcoins to record levels.

To witness this, we need to look at a couple of significant trends taking place in China and the financial world. China has been facing economic troubles for several years now, including a downturn in its property market, growing debt problems, and low returns from traditional investments. The majority of high net-worth Chinese investors are looking for better and safer ways of maintaining and growing their wealth. Meanwhile, the Chinese government is easing some banking regulations to support its economy — and this, Hayes explains, may mean additional capital will flee China and head into something such as Bitcoin.

Hayes also believes that the Western world's global financial system is weakening due to the excessive money printing by central banks. As confidence in traditional finance wanes, people — especially those from countries like China where economic instability is increasing — may start looking towards Bitcoin as a better store of value. For such investors, Bitcoin not only offers profit, but freedom and anonymity.

In one of his latest blog posts, Hayes explained that when the Chinese government starts stimulating liquidity and easing monetary policies, the effect may eventually trickle down to the crypto market. He added that while Chinese nationals may not directly buy Bitcoin from China due to strict regulations, they will use other means – such as via offshore exchanges or stablecoins – to tap the crypto market. Hayes predicted that the growing Chinese money into cryptocurrency could create an enormous bull run, similar to what happened in the past.

Table of Contents: 

• Is Arthur Hayes predicting a new wave of Chinese capital flowing into Bitcoin markets?

• Could the return of Chinese liquidity spark the next major bull run in Bitcoin?

• Is the Chinese government's economic stimulus indirectly benefiting crypto assets like Bitcoin?

• How might China’s monetary policies and weakening yuan influence Bitcoin investments?

• Is Arthur Hayes suggesting that Bitcoin could become a haven for Chinese investors?

• Will Hong Kong’s growing crypto infrastructure play a role in channeling Chinese money into Bitcoin?

• Is China quietly supporting crypto adoption despite its previous crackdown?

• Could Bitcoin benefit from capital flight as wealthy Chinese look for ways to protect their assets?

• Conclusion

• Frequently Asked Questions (FAQ's)

Is Arthur Hayes predicting a new wave of Chinese capital flowing into Bitcoin markets?

Yes, Arthur Hayes is predicting that fresh Chinese capital could pour into Bitcoin markets soon. Hayes believes that since China has some economic problems currently — like the weakening real estate market and lackluster investment opportunities — a lot of Chinese investors are looking for alternative places to invest. Bitcoin might be one of them, says Hayes.

While the Chinese government strictly controls cryptocurrencies, money still manages to make its way into Bitcoin by means of offshore exchanges or stablecoins. In Hayes's view, if the government continues to ease its monetary policy and let more and more money out of the country, much of that money can find its way into Bitcoin. This, in his view, can drive prices on Bitcoin to much higher levels and ignite another crypto bull trend.

Could the return of Chinese liquidity spark the next major bull run in Bitcoin?

Yes, the flow of Chinese liquidity could be what triggers the next big bull run for Bitcoin. Liquidity just refers to the fact that there is more money circulating for people to invest in. Arthur Hayes believes that if the Chinese government continues to invest more money into its economy as a way to fight sluggish growth, some of that money can end up in Bitcoin.

Despite rigorous regulation of crypto in China, Chinese investors ultimately find other means of investing in Bitcoin — be it foreign exchanges or stablecoins. If hundreds of thousands or millions of Chinese investors start once again investing in crypto, this would drive demand and push the prices of Bitcoin up. And so, that is why all experts, even Hayes, hope Chinese liquidity becomes the trigger of the next spiky price advance in Bitcoin.

Is the Chinese government's economic stimulus indirectly benefiting crypto assets like Bitcoin?

Yes, the Chinese government's economic stimulus may be indirectly helping crypto currencies like Bitcoin. When China has slow economic growth, the government will inject more money into the economy in order to stimulate the economy. This is called economic stimulus. Even though China has tight regulations on crypto, some of this excess money still finds its way into Bitcoin indirectly.

For example, affluent investors would be able to take their wealth out of China in the form of offshore accounts or stablecoins and subsequently invest in Bitcoin. Therefore, even though the government is not explicitly promoting crypto, its attempts to inject money into the economy could indirectly help Bitcoin and other cryptocurrencies by increasing demand.

How might China’s monetary policies and weakening yuan influence Bitcoin investments?

China's policies and devaluing yuan could have enormous effects on investing in Bitcoin. When China's government lowers interest rates or puts more money into circulation to fight sluggish growth, it becomes cheaper and easier for people to borrow and invest.

Meanwhile, if the Chinese yuan will continue to lose its value, many investors will worry about losing the value of their savings. In order to protect their money, some would look for stronger or safer assets — and one of them is Bitcoin.

Despite China's ban on crypto, investors will find ways to buy Bitcoin on overseas platforms. Hence, when the yuan is devalued and China's monetary policy is less tight, it can stimulate more people to invest in Bitcoin, driving its price up.

Is Arthur Hayes suggesting that Bitcoin could become a haven for Chinese investors?

Yes, Arthur Hayes is suggesting that Bitcoin could ultimately become a safe haven for Chinese investors. He believes that as the Chinese economy slows and the yuan keeps weakening, most Chinese investors could start looking for alternative ways of protecting their wealth. Hayes suggests that Bitcoin offers an alternative — it's not controlled by any government, it's limited in supply, and it can be accessed anywhere in the world.

Despite China's stringent rules on cryptocurrencies, Hayes is confident that Chinese investors will still find ways to buy Bitcoin through foreign exchanges or stablecoins. To him, Bitcoin can be "digital gold" for investors wanting to escape economic uncertainty in China.

Will Hong Kong’s growing crypto infrastructure play a role in channeling Chinese money into Bitcoin?

Hong Kong's developing cryptocurrency ecosystem can significantly facilitate the flow of Chinese capital into Bitcoin. While mainland China clamps down hard on cryptocurrency exchange, Hong Kong is governed by a different regulatory regime that provides for freer engagement with virtual currencies. This disparity places Hong Kong squarely in the path of Chinese investors looking to tap Bitcoin.

In April 2024, Hong Kong provided its greenlight for spot Bitcoin and Ethereum exchange-traded funds (ETFs) to list, allowing investors to invest in the cryptocurrencies directly through regulated financial products. Such ETFs are particularly well-suited for those investors who wish to have exposure to the crypto market without having to navigate the complexity of direct ownership.

Experts estimated that such money products would attract enormous investments from mainland Chinese investors. For instance, Matrixport, a Singapore-based crypto firm, estimated that Hong Kong's spot Bitcoin ETFs would receive up to $25 billion worth of investments from mainland investors under the Southbound Stock Connect scheme.

South China Morning Post

However, the issuers of these ETFs have clarified until April 2024 that direct investment by mainland Chinese investors is prohibited. Despite this restriction, the development of crypto-friendly products in Hong Kong demonstrates its ambitions to become a regional crypto hub. This shifting landscape might ultimately provide indirect entry points for Chinese capital to gain access to the Bitcoin market through Hong Kong's financial system.

Is China quietly supporting crypto adoption despite its previous crackdown?

Technically, China still officially forbids cryptocurrency trading and mining on the mainland. The government has relentlessly cracked down on crypto exchanges, mining operations, and other financial institutions that have anything to do with digital currencies since 2021. However, at the same time, some recent events suggest that China might be indirectly or quietly supporting crypto adoption, especially through Hong Kong.

Here's why so many think so:

1. Hong Kong's Crypto Growth Support

Hong Kong, a part of China's "One Country, Two Systems" policy, has recently moved aggressively to position itself as a crypto hub. The Hong Kong government has:

• Approved spot Bitcoin and Ethereum ETFs.

• Issued licenses to crypto exchanges.

• Established clear and open-ended regulations for digital assets

While mainland Chinese investors are technically not allowed to directly invest in these Hong Kong crypto products, most analysts believe that China is employing Hong Kong as a testing ground or "controlled gateway" to experience how crypto can be integrated into the overall financial system — without affecting mainland policy too much.

2. Interest in Blockchain, Not Public Crypto

China has consistently distinguished itself between public cryptos like Bitcoin and blockchain technology. The Chinese government strongly favors:

• Central Bank Digital Currency (CBDC) — e.g., its digital yuan.

• Blockchain technology is applied in sectors like supply chain, finance, and trade.

• This means China isn't anti-crypto per se — just against decentralized money that circumvents state control

3. Capital Outflows through Crypto

In spite of strict prohibitions, some of Chinese capital still finds its way into crypto through stablecoins, OTC desks, and global platforms. And while the government tries to shut down these routes, it seems to tolerate some of this secretly, especially when the economy is in decline and citizens are looking for new sources of value storage.

Could Bitcoin benefit from capital flight as wealthy Chinese look for ways to protect their assets?

Yes, Bitcoin can certainly make use of capital flight as Chinese citizens with a high net worth seek safer vehicles to insure their assets.

This is how it works in summary:

What is Capital Flight?

Capital flight takes place when individuals move money out of a country — usually because they're worried about the economy, government activities, or depreciation of their currency.

In the case of China:

• The yuan is weakening.

• The real estate market is decreasing.

• The stock market is uncertain.

• The government imposes strict controls on the export of currency.

Conclusion

China in the past couple of years has been staunchly against cryptocurrencies like Bitcoin by outlawing trading and mining. Yet now it seems things are quietly and interestingly changing. Even though China remains officially against crypto, it is allowing Hong Kong to emerge as a global crypto hub, complete with regulated exchanges and even Bitcoin ETFs. This might be a master stroke to enable innovation to happen without changing the overall rules inside China.

While that is happening, China's economy also takes a huge hit — such as a weak property market, slow growth, and a weakening yuan. Thus, many of China's rich people are worried about losing the value of their money. And since the Chinese government also tightens capital controls (limiting remittances abroad), people begin to look for alternative methods to preserve their riches. Step into Bitcoin.

Bitcoin does not fall under government control, can be stored electronically, and has a capped supply, so it is a popular option during uncertain times. Chinese investors are finding ways to get around crypto bans by using offshore exchanges or stablecoins as a way to buy Bitcoin. They see it as a "digital haven" — a digital store of value, like gold.

Frequently Asked Questions (FAQ's)

Que: Is China still banning Bitcoin?

Ans: Yes, mainland China is still officially banning the trading, mining, and use of Bitcoin. However, Hong Kong can have a crypto-friendly system on its own, which is providing new hope to investors.

Que: Why are Chinese investors interested in Bitcoin?

Ans: Since the Chinese economy is decelerating and the value of their yuan is declining, with property values crashing, Chinese investors are mostly afraid of losing money. They think that Bitcoin is a safe and independent way to maintain wealth.

Que: How can Chinese investors buy Bitcoin if it's illegal?

Ans: Some utilize offshore trading sites, stablecoins like USDT, VPNs, and off-exchange channels to buy Bitcoin despite not being sanctioned.

Que: What is capital flight, and how is it related to Bitcoin?

Ans: Capital flight is the movement of funds away from a country due to fear or uncertainty. Bitcoin is a hot choice for capital flight as it can be easily moved and is hard to track.

Que: What is the role of Hong Kong here?

Ans: Hong Kong is becoming a hub for cryptocurrencies, with Bitcoin ETFs and regulated exchanges. Mainland Chinese investors are not legally allowed to invest yet, but Hong Kong can become an access point for Chinese funds to go into cryptocurrency markets.