In a recent analysis, Arthur Hayes, co-founder of BitMEX and a well-known voice in the cryptocurrency space, suggested that Bitcoin may experience further price corrections before rebounding toward new highs.
Hayes, recognized for his in-depth crypto essays and macroeconomic commentary, has revised his earlier prediction that the Bitcoin bull market would surge in September, cautioning investors to expect more sideways movement and a potential drop toward $50,000.
Despite this short-term bearish outlook, Hayes maintains his overall optimism for Bitcoin’s long-term trajectory.
“I have changed my mind, but it doesn’t affect my positioning at all. I’m still long as [expletive] in an unlevered fashion,” he stated confidently in his latest blog post.
According to Hayes, the market’s next significant move will likely be triggered by anticipated liquidity injections from the U.S. Federal Reserve and the U.S. Treasury.
“Boom Times … Delayed” is an essay on my thots on y Fed rate cuts won’t initially lead to a pump in #crypto assets.https://t.co/lt9ilAkZ0K pic.twitter.com/okpTky0YWl
— Arthur Hayes (@CryptoHayes) September 3, 2024
Waiting for the Liquidity Flood
Hayes predicts that emergency liquidity could soon flow into the economy, as U.S. policymakers grapple with ongoing instability in the financial markets. He points specifically to the Treasury General Account as a potential source of funding and speculates that the Federal Reserve may reintroduce quantitative easing to stabilize the bond market.
“I expect intervention to begin in late September,” Hayes wrote, suggesting that until then, Bitcoin prices may remain stagnant or drift lower.
This temporary market lull is what Hayes refers to as “chop”—a period of sideways trading marked by little directional movement. However, Hayes sees any potential price dips as temporary, with the market eventually rebounding as fiscal and monetary interventions take hold.
Interest Rates, Treasuries, and Bitcoin’s Future
Bitcoin’s value surged to $64,000 in August after Federal Reserve Chair Jerome Powell hinted at potential interest rate cuts. Lower rates traditionally spur asset markets, making it cheaper for investors to borrow money and allocate capital toward riskier assets like cryptocurrencies. However, Hayes believes that the rally was short-lived and driven by temporary factors. He described the price pump as a “sugar high” in a previous essay, noting that external macroeconomic pressures could still weigh on the market.
“Sugar High” is an essay on why JAYPOW’s rate hike will not be enough … but he will bring the real food in due time.https://t.co/z09cZW5phl pic.twitter.com/P5xwqvCRXm
— Arthur Hayes (@CryptoHayes) August 28, 2024
One of these pressures is the growing strength of the Japanese yen, which threatens to disrupt what is known as the “yen carry trade”—a financial strategy that has helped buoy asset prices, including Bitcoin. In addition, the Federal Reserve’s Reverse Repo Program (RRP) has started attracting more deposits, which, according to Hayes, effectively “sterilizes” money that could otherwise be re-leveraged into the market, curbing asset growth.
“Assuming the Fed doesn’t cut rates before the September meeting, I expect T-bill yields to stay firmly below those of the RRP,” Hayes explained, implying that this could further dampen asset prices, at least in the short term.
Long-Term Optimism
While Hayes acknowledges that Bitcoin could “slowly leak” toward $50,000 in the coming weeks, he remains confident that the long-term outlook is positive. He expects interest rate cuts to eventually push yields on 10-year U.S. Treasury bonds up to 5%, a level at which the Treasury may feel compelled to inject liquidity into the market—potentially repeating its actions from 2023 when similar conditions prevailed.
According to Hayes, this government intervention would once again drive investors toward Bitcoin, seen by many as a hedge against inflation and currency devaluation.
“Given these circumstances, I believe the government will play from the same playbook and help boost Bitcoin prices in the coming months,” Hayes said.
Political Stakes
In his analysis, Hayes also touched on the potential political ramifications of the U.S. economic outlook. He speculated that U.S. Treasury Secretary Janet Yellen might face pressure to act quickly, especially with the 2024 presidential election approaching.
“Should Yellen not boost markets fast, it could cost Kamala Harris the election in November,” Hayes claimed, referring to the Democratic Party’s high stakes in maintaining a stable economy ahead of the vote.