Bitcoin Halving, Federal Reserve Moves Could Ignite Crypto Firesale, Warns BitMEX Co-founder
Summary:
BitMEX co-founder, Arthur Hayes, predicts that the upcoming Bitcoin halving combined with strategies from the Federal Reserve and Treasury could intensify the crypto asset firesale, leading to potential market depression. Despite his caution of a price downturn around the halving, Hayes remains optimistic about the long-term potential for market growth. The critical period of late April involves an anticipated liquidity drain due to U.S. tax payments, the Federal Reserve's Quantitative Tightening (QT), and the awaiting use of the Treasury's General Account (TGA). Post-May, after the Fed reduces the pace of money supply tightening, Hayes expects a bolstering of market health with increased liquidity.
This month's Bitcoin halving, fortified by strategic moves from the Federal Reserve and Treasury, is anticipated to intensify the existing crypto asset firesale and could potentially lead to market depression for several weeks, warns Arthur Hayes, co-founder of BitMEX. In his blog post on April 8, Hayes expressed his prediction that the impending Bitcoin halving may boost prices mid-term but cautioned of a potential downturn directly prior to and following the event. Hayes stated that the prevailing belief of halving positively impacting crypto prices is deeply embedded, yet when a consensus is reached regarding a certain outcome, the contrary usually prevails.
The BitMEX co-founder conjectured that the halving coincides with a period when dollar liquidity is less accessible than usual. He detailed his hypothesis regarding how the policies of the United States Federal Reserve and Treasury impact market behaviour, resulting in a likely slump in Bitcoin and general crypto prices around the halving. However, Hayes remains optimistically bullish regarding the crypto market's potential for growth, admitting he would welcome being proven incorrect.
As the second half of April approaches, Hayes anticipates a risky timeframe for assets as U.S. tax payments drain liquidity, the Federal Reserve initiates Quantitative Tightening (QT) reducing the money supply, while the idle Treasury's General Account (TGA)—essentially the government's operational account — is anticipated to be utilized.
Following the Fed meeting on May 1, Hayes expects the Federal Reserve to slow down money supply tightening, while the Treasury likely deposits an additional $1 trillion of liquidity into the system to bolster market health. Hayes concluded that his projections regarding Bitcoin halving in conjunction with the Fed and Treasury's calculated manoeuvres are the reasons he has chosen to suspend trading until May.
Year-to-date, Bitcoin (BTC) has risen over 61%, shifting from roughly $42,200 to presently trading at $71,170, as reported by Cointelegraph Markets Pro. The Crypto Fear & Greed Index, a measure of market sentiment, has also risen accordingly, remaining in 'Greed' territory — scoring 50 out of 100 or higher — since January 27.
The start of the year saw the index at a score of 65 ('Greed'), reaching an all-time high of 90 on March 5, the highest in two years. Hayes theorized that if the liquidity situations he propounded transpire, it will inspire more confidence to dive into various low-quality investments. He concluded that missing out on minor gains, while definitely avoiding losses, is a favourable outcome for his portfolio and lifestyle.
Published At
4/9/2024 5:41:09 AM
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