in his latest book blog post Released on January 19, former BitMEX CEO Arthur Hayes predicted a “global financial meltdown” thanks to the future economic woes of the United States.
Hayes: Cryptocurrency will be “smoked” in the Federal Pivot System
It is likely that Bitcoin’s current rally should not be taken as the beginning of a new bullish wave.
That’s the view of Arthur Hayes, who warned in a new treatise on US macroeconomic policy this week that the Fed’s current behavior could shift from restrictive to liberal, but cause “crypto assets to smoke.”
With inflation easing in the US, the Federal Reserve is the focus of nearly every cryptocurrency analyst this year as they assess the possibility of a policy “pivot” away from quantitative tightening (QT) and raising interest rates to steady and then decreasing, possibly even quantitative. dilution (QE).
Essentially, this involves moving away from draining the liquidity economy into pumping it back in, and while this practice has led to new all-time highs for bitcoin starting in 2020, the same phenomenon won’t be as easy next time around, Hayes believes.
“If eliminating half a trillion dollars in 2022 results in the worst performance of bonds and stocks in a few hundred years, imagine what would happen if twice that amount were removed in 2023,” he wrote.
“The reaction of markets when money is injected against withdrawals is not uniform – and as such, I would expect the law of unintended consequences to bite the Fed in the ass as it continues to withdraw liquidity.”
As such, rather than a smooth transition away from QT, Hayes is betting on extreme circumstances that force the Fed to act.
“Part of the US credit market is collapsing, leading to a financial meltdown across a wide range of financial assets,” he explained.
“In a similar response to the action it took in March 2020, the Fed called an emergency press conference, halted QT, cut interest rates sharply and resumed quantitative easing (QE) by buying bonds again.”
This, in turn, means “risky asset price crater”.
“Bonds, stocks, and every cryptocurrency under the sun are all being smoked as the glue holding together the global financial system based on the US dollar wears off,” the blog post continues.
Current estimates, as shown by the CME group FedWatch toolAnd, overwhelmingly, the Fed is in favor of lowering the pace of interest rate hikes in its next decision on February 1st.
Replay planned for March 2020
Hayes is far from in doubt about Bitcoin being a flat “buy” company right now after two weeks of near-vertical price growth.
As Cointelegraph mentionedMany commentators are betting that new macro lows will continue to emerge, with Bitcoin / US Dollar (BTC/USD) exiting the lower boundary of the fourth quarter of 2022.
Those who leap of faith and accumulate now face serious risks before reward.
“This scenario is less ideal because it would mean that everyone buying risky assets now would be in store for a significant underperformance. 2023 could be just as bad as 2022 until the Fed pivots,” Hayes wrote, nevertheless calling that scenario “the case.” the basic “.
If this means a retest of the 2022 lows, then the $15,000-$16,000 area would be a key area of interest going forward.
“I will know that the market may have bottomed out, because the crash that occurs when the system temporarily breaks will either carry the previous lows of $15,800, or it won’t,” the blog concluded.
“It doesn’t really matter what level is ultimately reached in the downdraft because I know the Fed will move later on to print money and avoid another financial meltdown, which in turn will set the local bottom for all risky assets. And then I had another similar setup for the month March 2020, which required me to back up the truck and buy cryptocurrency with two hands and a shovel.”
bitcoin (BTC) faces a drop to $15,000 “or less” as part of the collective risk asset capitulation, says Arthur Hayes.
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