Imagine a video call between U.S. President Donald Trump and Venezuelan President Pepe Maduro, as Maduro is flying from Caracas to New York.
Trump: "Pepe Maduro, you're a real scoundrel. Your country's oil is mine now, long live America!"
Pepe Maduro: "Trump, you're a madman!"
*Note: Arthur Hayes refers to the Venezuelan president as "Pepe Maduro" in the article, rather than his real name, Nicolás Maduro. "Pepe" is a common nickname for "José" in Spanish, although Maduro's name is Nicolás.
The historic, subversive, authoritarian, and militarized event of the United States "kidnapping" or "legally arresting" the leader of a sovereign nation can be labeled with a variety of positive and negative tags. Countless AI-assisted writers will undoubtedly produce a plethora of articles interpreting this event and predicting the future. They will judge these actions from a moral perspective and advise other countries on how to respond. But this article has no intention of doing so; the core question is singular: Will the US "colonization" of Venezuela drive up or down the price of Bitcoin/cryptocurrencies?
The only rule of politics: reelection
To answer this question, we must understand a simple and brutal political reality: all elected politicians focus on only one thing at all times—winning re-election. Grand narratives about God or the nation take a backseat to winning votes. Because without power, you cannot bring about change, this obsession with re-election is, to some extent, rational.
For Trump, two elections are crucial: the 2026 midterm elections and the 2028 presidential election. While he himself will not need to run in 2026, nor will he be eligible for a third term in 2028, the loyalty and obedience of his political supporters depend on their individual prospects for re-election. Those who have turned away from the "Make America Great Again" (MAGA) camp do so precisely because they believe that continuing to follow Trump's directives will bleak their future prospects for re-election.
So how can Trump ensure that swing voters who have not yet decided to support the Democrats (blue camp) or the Republicans (red camp) will cast the "right" vote in November 2026 and 2028?
It appears that the Democratic Party, favoring the blue camp, is likely to regain control of the House of Representatives. If Trump wants to emerge victorious, he must act immediately. Time is running out to adjust policies and change voters' minds.
What do voters care about? The economy, especially oil prices.
So how do you win over swing voters? All the fancy cultural battles are worthless compared to voters' wallets. Voters only care about the economy —whether they feel rich or poor when they vote.
For Trump, the simplest way to stimulate the economy is to turn on the printing presses and boost nominal GDP. This would drive up financial asset prices, pleasing the wealthy who would "repay" him with campaign donations. However, in the United States, it's one person, one vote. If printing money leads to severe inflation and a surge in the cost of living for ordinary people, they will use their votes to oust the ruling party from power.
Trump and Treasury Secretary Bessant have stated they will keep the economy running smoothly. The question is, how will they curb inflation? The kind of inflation that could cost them their re-election chances is inflation in the food and energy sectors.
For the average American, the most sensitive inflation indicator is gasoline prices. Because the US public transportation system is underdeveloped, almost everyone drives, and gasoline prices directly impact everyone's cost of living.
Therefore, Trump and his deputies "colonized" Venezuela for its oil.
When discussing Venezuela's oil, many people immediately point to the country's world-leading proven reserves. But the amount of oil underground is less important than the ability to extract it profitably. Trump apparently believes that by developing Venezuela's oil resources, the oil can be shipped to refineries in the Gulf of Mexico, and cheap gasoline will appease the public by curbing energy inflation.
Whether this strategy is correct will be answered by the West Texas Intermediate (WTI) and Brent crude oil markets. Will oil prices rise or fall as nominal GDP and dollar credit supply increase? If GDP and oil prices rise in tandem, the blue-camp Democratic Party will win; if GDP rises while oil prices remain flat or fall, the red-camp Republican Party will win.
The best part of this framework is that oil prices will reflect all the reactions of other oil-producing countries and military powers (most importantly Saudi Arabia, Russia, and China) to the US "colonization" of Venezuela. Another advantage is the market's reflexivity. We know Trump will adjust his policies based on stock prices, US Treasury bonds, and oil prices. As long as stock prices continue to rise and oil prices remain low, he will continue printing money and pursuing "colonial" policies to acquire oil. As investors, we can react in the same timeframe as Trump, which is the best-case scenario we can expect. This reduces the need to predict the outcome of complex geopolitical systems. Traders simply need to read the charts and adapt accordingly.
The following charts and statistical analyses clearly demonstrate why Trump must boost nominal GDP while simultaneously suppressing oil prices in order to win the election:
- Political landscape: The red and blue camps are evenly matched, with only a small group of Americans deciding which camp controls the government.
- Voter focus: The economy and inflation are the two issues that voters care about most; everything else is secondary.
- The "10% rule" states that when the national average gasoline price in the three months leading up to an election is 10% or more higher than the average price in January of the same year, control of one or more government departments will change hands.
- Election Outlook: If the economy does not experience a recession, the Red camp has the best chance of winning the 2028 presidential election.
These charts clearly demonstrate that Trump must keep the economy running smoothly without causing gasoline prices to rise.
Bitcoin price movements in two scenarios
We face two scenarios: one is that nominal GDP/credit and oil prices both rise; the other is that nominal GDP/credit rises while oil prices fall. How will Bitcoin react?
To understand this, we must first clarify a core point: oil prices are crucial not because they affect mining costs, but because they have the power to force politicians to stop printing money.
Bitcoin's energy consumption through Proof-of-Work (PoW) mining makes it a purely monetary abstraction. Therefore, energy prices are unrelated to Bitcoin prices, as the costs for all miners change synchronously, and this does not alter Bitcoin's intrinsic value logic.
The true power of oil prices lies in their ability to act as a trigger for political and financial disasters.
The chain reaction of runaway oil prices
If economic expansion leads to excessively rapid and high oil price increases, it will trigger a series of devastating chain reactions:
Out-of-control oil prices mean soaring living costs, which will directly ignite voter anger and put those in power at great risk of being ousted . To retain power, they must do whatever it takes to suppress oil prices (e.g., steal oil from other countries or slow credit creation). The 10-year U.S. Treasury yield and the MOVE index, which measures volatility in the U.S. bond market, will tell us when oil prices are too high.
Investors face a difficult choice: invest in financial assets or real assets. When energy costs are low and stable, investing in financial assets such as government bonds makes sense. But when energy costs are high and volatile, investing in energy commodities is wiser. Therefore, when oil prices reach a certain level, investors will demand higher yields from government bonds (especially 10-year U.S. Treasury bonds).
When the 10-year US Treasury yield approaches 5%, market volatility may increase significantly, and the MOVE index may surge. Current US politics struggle to curb deficit spending, and "free benefits" often hold an advantage in elections. However, with rising oil prices and yields nearing critical levels, the market may face pressure. Because the current fiat currency financial system is heavily leveraged, investors must sell assets or risk losing everything when volatility rises.
For example, April 2nd last year, "Liberation Day," and the subsequent Trump "TACO" (tariff action) on April 9th are case studies. At the time, Trump threatened to impose extremely high tariffs, which would have reduced imbalances in global trade and financial flows, thus creating a strong deflationary effect. The market reacted with a sharp drop, and the MOVE index surged to 172 at one point during the day. The next day, Trump "suspended" the tariffs, and the market subsequently bottomed out and rebounded sharply.
MOVE Index (white) vs. NASDAQ 100 Index (yellow)
On such issues, attempting to pinpoint the exact levels of oil prices and 10-year yields that would force Trump to tighten money printing is pointless. We'll know when we see it happen. If oil prices and yields rise sharply, then we should reduce our bullish stance on risky assets.
The current baseline scenario is that oil prices will remain stable or even decline, while Trump and Bessett will print money like they did in 2020. This is because the market initially believes that US control of Venezuelan oil will significantly increase daily crude production. Whether engineers can actually achieve millions of barrels per day of production in Venezuela is irrelevant.
The real key point is this: Trump will print money faster than Israeli Prime Minister Benjamin Netanyahu keeps changing the reasons for striking Iran. If this logic still isn't enough to convince people to long on all risk assets now, just remember this: Trump is the most socialist-leaning US president since Roosevelt. He printed trillions of dollars in 2020 and, unlike previous presidents, distributed the money directly to everyone. It's safe to say he won't lose the election because of insufficient money printing.
Based on statements from Trump and his core team, we know that credit will expand. Red-camp Republican lawmakers will engage in deficit spending, Bessant's Treasury will issue debt to finance it, and the Federal Reserve (whether Powell or his successor) will print money to buy those bonds. As Lyn Alden put it, "Nothing can stop this train." With the expansion of the dollar supply, the prices of Bitcoin and certain cryptocurrencies will skyrocket.
Trading Strategies
Arthur Hayes' biggest loss last year came from trading after the launch of the PUMP token. Also, remember to stay away from Meme coins; his only profitable Meme coin trade last year was Trump. On the bright side, most of his profits came from trading HYPE, BTC, PENDLE, and ETHFI. Although only 33% of his trades were profitable, with proper position sizing, the average profit on winning trades was 8.5 times the average loss on losing trades.
Arthur Hayes plans to focus his efforts this year on his strengths: large-scale, medium-term positions based on a clear macro liquidity argument and a credible Altcoin narrative. He will reduce position size when trading "shit coin" or meme coins for entertainment purposes.
Looking ahead, this year's dominant narrative will revolve around "privacy." ZEC will become a bellwether in the privacy field. Maelstrom has already long in the token in Q3 2025, planning to find at least one "Altcoin" in the privacy field that can lead the trend and bring excess returns to the portfolio in the coming years. In order to obtain excess returns that surpass BTC and ETH, it plans to sell some Bitcoin and Ethereum in exchange for "Altcoin" with greater explosive potential in the privacy and DeFi fields.
Once oil prices rise and cause credit expansion to slow, they will take profits, accumulate more Bitcoin, and buy some mETH.
