Bitcoin Set for Rebound? Arthur Hayes Blasts Federal Reserve Policies

Arthur Hayes, co-founder and former CEO of BitMEX, is cautiously optimistic about Bitcoin's potential rebound after a tough period.

He recently closed a Bitcoin short position with a modest 3% profit, enough to cover his expenses for Korea Blockchain Week (KBW). Hayes suggests that if market conditions worsen, Bitcoin could benefit from increased liquidity.

Hayes is critical of the Federal Reserve’s policies, arguing they fail to address the root cause of inflation—excessive government spending. He views the Fed’s measures as ineffective and its independence as a myth. Instead, he looks at the bond market for signals, noting the rise in 10-year Treasury yields as a warning. He expects these yields to approach 5% with upcoming rate cuts and anticipates that Treasury Secretary Janet Yellen will act to inject liquidity into the market.

He believes that if yields hit 5%, it could disrupt the stock market, increase mortgage rates, and affect smaller banks, potentially creating a volatile environment as the US heads into an election cycle. This turmoil might create favorable conditions for Bitcoin.

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Hayes expects Yellen to act swiftly due to political pressures and suggests she may encourage the Federal Reserve to end quantitative tightening and possibly restart quantitative easing. Such moves would likely boost liquidity and benefit Bitcoin.

While Hayes has adjusted his short-term market outlook, he remains confident in Bitcoin’s long-term potential and continues to hold his position. He advises against relying on his short-term predictions, acknowledging their inherent uncertainty.

Alexander Stefanov