In summary
- Bitcoin still faces turbulence and potential further declines before a potential significant rally later this month, according to BitMEX co-founder Arthur Hayes.
- Hayes admitted that his previous prediction that the Bitcoin bull market would “start again” in September was incorrect, but his pessimism remains “temporary.”
- Hayes expects the Federal Reserve and the US Treasury to inject emergency liquidity into the market by the end of September, which could boost Bitcoin prices.
Bitcoin still faces turbulence and potential further declines before a potential significant rally later this month, according to BitMEX co-founder Arthur Hayes.
In his latest post, the famous Cryptocurrency analyst admitted that his previous prediction that the Bitcoin bull market would “start again” in September was incorrect, but that his pessimism remains “temporary.”
“I’ve changed my mind, but it doesn’t affect my positioning at all. I’m still very long on an unleveraged basis,” he wrote on Tuesday.
Rather, Hayes has simply delayed his bullish expectations for a few weeks while he waits for the Federal Reserve and the U.S. Treasury to inject emergency liquidity into the market. This liquidity, he says, will likely come from the Treasury General Account and a possible restart of quantitative easing aimed at maintaining stability in the Treasury bond market.
“I expect the intervention to start at the end of September,” he added. “Between now and then, Bitcoin will at best hover around these levels and at worst slowly fall towards $50,000.”
Bitcoin initially surged to $64,000 following Fed Chair Jerome Powell’s promise to begin lowering interest rates last month. Lower interest rates mean cheaper borrowing costs, which has largely proven bullish for scarce assets and stocks, such as BTC.
In an essay last week, Hayes described the rally as a “sugar high” that would likely fade as the Japanese yen began to show relative strength, potentially ending the yen “carry trade” that has kept asset prices buoyant.
But Hayes soon discovered that there was another factor at play. The Fed’s Reverse Replenishment Program (RRP) began taking in more deposits after Powell’s speech, surging due to its relatively higher yield compared to U.S. Treasuries. According to Hayes’ theory, a rising RRP “sterilizes” money, making it unable to be leveraged back into the financial system, and therefore unable to boost asset prices.
“Assuming the Fed does not cut rates before the September meeting, I expect Treasury yields to remain firmly below the RRP,” Hayes said.
In the long term, Hayes expects the rate cuts to push 10-year Treasury bond yields toward 5%. Given that the Treasury found it necessary to inject liquidity into the market when yields hit this level last year, Hayes expects the government to repeat the same approach, and once again boost Bitcoin.
If Yellen doesn’t quickly boost markets, he believes it could cost Kamala Harris the election in November.
“Given these circumstances and Yellen’s dogged loyalty to the Democratic Party’s Manchurian candidate, Kamala Harris, those red heels are about to trample the entire ‘free’ market,” he said.
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.
For the Latest Crypto News, Follow ©KeynoteUSA on Twitter Or Google News.
Disclaimer: Please note that the information provided on this page is for News purposes only and should not be considered investment or trading advice. ©Crypto.keynoteusa.com strongly recommends that you conduct independent research and/or consult with a qualified professional before making any investment decisions.
