In his latest article “Signposts”, BitMEX co-founder Arthur Hayes expects Bitcoin to experience a 20% to 30% price correction in early March. He came to this conclusion focusing on three variables. However, factors that overturn this conclusion are related to Taiwan’s presidential election…
(Previous summary: Arthur Hayes: Are Bitcoin spot ETFs really a good thing?)
(Background supplement: The U.S. 401(k) retirement plan wants to buy Bitcoin spot ETF! Arthur Hayes warns: Too successful will destroy BTC)
BitMEX co-founder Arthur Hayes has gained attention in the cryptocurrency space for his confident and forthright writing style, often expressing opinions that differ from mainstream opinion. In his latest article “Signposts”, Hayes analyzed the current trends and potential risks in the cryptocurrency market, and explained his reasons for being bearish on Bitcoin’s performance in early March.
Hayes uses the metaphor of skiing to introduce the theme, comparing it to finding investment “signposts” in global capital markets. He highlighted three major variables affecting the market: declining reverse repurchase program (RRP) balances, bank term financing program (BTFP) renewals, and the Fed’s interest rate policy.
RRP and market liquidity
The decline in reverse repurchase program (RRP) balances essentially means an increase in market liquidity. Hayes predicted that if RRP balances fall to “near zero” in early March (that is, about $200 billion, which is quite small relative to the size of the overall financial market), the market may correct. This is because the market needs to find new sources of USD liquidity to maintain activity.
However, Hayes noted that if there are no other sources of liquidity after the RRP funds are exhausted, it could lead to a decline in the prices of various assets including bonds, stocks, and even cryptocurrencies.
Note: As for why the decline in RRP balance will inject liquidity into the financial system, Haye said you can read his article Bad Gurl。
The impact of whether to renew BTFP contract
March Federal Open Market Committee (FOMC) meeting
Hayes stressed the importance of the March Federal Reserve (FOMC) meeting. He predicted that between the expiration of the Bank Term Financing Program (BTFP) on the 12th and the Fed’s interest rate decision on the 20th,Bank bankruptcy may occur, forcing the Federal Reserve to announce an interest rate cut and restore BTFP. Therefore, Bitcoin and the broader financial markets may be heading lower ahead of the March FOMC meeting. However, he also expects Bitcoin to rebound before the FOMC meeting as it is viewed as a global neutral reserve currency that does not rely on the traditional banking system.
Bitcoin will correct by 20% to 30% in early March
Hayes predicts that in early March, the RRP will be exhausted and the BTFP will be canceled on March 12, but is expected to be restored on the 20th, and the Fed may cut interest rates at the same time. This could cause Bitcoin to experience a 20% to 30% price correction in early March, and the correction could be even greater if a U.S.-listed Bitcoin spot ETF had begun trading.In order to hedge against the downside risk of the market, Hayes plans to purchase Bitcoin put options and will closely monitor market trends between March 12 and 20 to decide when to close the position.
What’s the relationship with Taiwan’s elections?
In addition, Hayes also considered the potential market impact of Taiwan’s elections and Bank of Japan policy. He mentioned,If Taiwan’s pro-China candidate wins, Xi Jinping may increase the printing of yuan, which may cause cryptocurrency prices to rise even if the RRP funds are depleted and the BTFP is not renewed.This would make the risk-to-reward ratio of the trade less attractive, possibly causing Hayes to change strategy and choose not to purchase puts and instead increase his investment in cryptocurrencies.
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2024-01-05 10:45:11
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