As a seasoned crypto investor with a decade of experience navigating the digital asset landscape, I find Arthur Hayes’ analysis both insightful and compelling. His unique perspective on the interplay between government liquidity operations and asset prices resonates deeply with my own observations.
In a fresh piece of writing, Arthur Hayes – co-founder of cryptocurrency exchange BitMEX – has sketched an optimistic future for Bitcoin and other altcoins. His perspective, centered around the influence that government liquidity measures have on asset values, hints at an impending bullish trend in the crypto sector, fueled by shrewd fiscal moves by the U.S. Treasury.
When Will The Bitcoin Bull Run Return?
In a similar vein, Hayes draws an analogy between the importance of water quality in brewing coffee and the significance of liquidity in financial markets. Much like how the quality of water significantly influences the taste of a cup of coffee, liquidity plays a pivotal role in ensuring the well-being and smooth functioning of financial markets. Interestingly, Hayes notes that many investors tend to overlook the influence of liquidity and instead focus predominantly on factors such as technological innovations or regulatory reforms.
Hayes clarifies the idea of “fiscal dominance,” a state where a government’s financial obligations take priority over all other economic factors such as controlling inflation. Critically, he questions the strategies employed by the current US Treasury Secretary, Janet Yellen, whose approach, in Hayes’ view, prioritizes achieving nominal economic growth without regard for potential inflationary consequences.
During a time when managing the state’s finances takes priority over controlling inflation, Hayes explains. He elaborates on how this change affects liquidity, pointing out that bank credit and consequently nominal GDP growth need to be maintained at elevated levels, regardless of whether it leads to persistent inflation higher than the target rate.
By pointing out the relationship between government financial decisions and crypto market fluctuations, Hayes emphasized that there’s a link between Treasury actions, such as increasing T-bill issuance, and Bitcoin price changes. When the Treasury boosts T-bill issuance, it moves liquidity away from programs like the Reverse Repo Program (RRP) into more active sectors. Over time, this trend has been associated with higher Bitcoin prices.
“Initially, as the RRP (represented in white) dropped from its peak, the price of Bitcoin (symbolized in gold) started to surge back from its lows. This correlation seems quite close. As funds exit the Federal Reserve’s balance sheet, it introduces more liquidity, which can lead to… Consequently, if Bad Gurl Yellen’s prediction is correct, approximately $301bn of Treasury bills will be net issued between now and year-end. If this trend continues, Bitcoin may swiftly recover from the decline caused by the yen‘s appreciation. The next potential target for Bitcoin could be $100,000, according to Hayes’ speculation.”
When Altcoin Season?
As an analyst, I would emphasize the importance of tracking fiscal and monetary policies, particularly the activities of the US Treasury, for crypto traders like ourselves. These policies often serve as early indicators of major market fluctuations. By closely observing T-bill issuance and the Treasury’s strategic moves, we can glean insights about impending shifts in market liquidity and potential price adjustments, a strategy suggested by Hayes.
Turning our attention to the wider cryptocurrency landscape, Hayes also touches on the possibility of an ‘altcoin season’ or surge in altcoins. He anticipates this trend will unfold after a rise in Bitcoin and Ethereum prices. “Altcoins are more volatile investments related to Bitcoin in the crypto market. However, during this particular cycle, Bitcoin and now Ethereum have strong underlying support from net inflows into US-listed exchange-traded funds (ETF). Although Bitcoin and Ethereum have experienced a decline since April, they’ve managed to avoid the chaos that has hit the altcoin markets.”
Predicting a possible altcoin boom similar to past market cycles, Hayes is confident that the right moment will arrive. Nevertheless, it’s important to note that an altcoin revival won’t occur until Bitcoin and Ether surpass $70,000 and $4,000 respectively. He further explains that a robust rally in Bitcoin and Ether into year-end, driven by dollar liquidity, will pave the way for another exciting round of altcoin investments or “sexy shitcoin soiree.”
Based on my extensive experience in the cryptocurrency market and observing various political events, I believe that Hayes is making a shrewd move by capitalizing on the upcoming US elections. As someone who has navigated through multiple market cycles, I have learned that major political events can significantly impact the crypto market. The election in November could potentially create a surge of liquidity, as investors may look to capitalize on the uncertainty surrounding the outcome.
After the US election and resolution of the US debt ceiling, Hayes expects a significant market correction might occur. He believes that once the US debt ceiling issue is resolved, there could be an influx of liquidity from both the U.S. Treasury and the Fed to stabilize the markets. Once this happens, he predicts that a genuine bull market will commence, with his base case still being $1 million Bitcoin.
At press time, BTC traded at $58,783.
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2024-08-13 20:11