Hayes anticipates a short-term Bitcoin pullback activated by reserve bank actions, however his long-lasting outlook stays bullish.
Leading figures are turning mindful as the result of Bitcoin exchange-traded funds (ETFs) edges better. In an article released on January 5, BitMex creator Arthur Hayes forecasted that Bitcoin would fall 20-30% in March following the prospective approval of a Bitcoin ETF, and the crypto market may go into a significant correction.
Hayes’ analysis indicate a possible problem activated by the interaction of 3 essential elements: the Reverse Repo Program (RRP) balance, the Bank Term Funding Program (BTFP), and the Federal Reserve’s rate cut.
The RRP is a short-term financing center run by the Fed. Hayes anticipates the RRP balance will drop to $200 billion by early March. The prospective decrease, paired with the absence of alternative liquidity sources, might cause recessions in the bond market, stocks, and cryptocurrencies.
Source: cryptohayes.medium.com
The 2nd danger is the Bank Term Funding Program (BTFP), an emergency situation financing effort introduced by the Fed in March 2023 in reaction to issues about monetary stability throughout in 2015’s banking crisis. The program provides loans of approximately one year to qualified organizations, protected by top quality security like United States Treasuries, company financial obligation, and mortgage-backed securities.
With the BTFP’s expiration date set up for March 12, Hayes alerts of the prospective money deficiency if banks can not return the funds. The Fed’s information reveals that BTFP financing struck a record high of $141 billion in the week through January 3.
Source: Bloomberg
According to Hayes, some non-Too Big To Fail (non-TBTF) banks might deal with liquidity crunches, potentially pressing them near insolvency. This pressure might set off a cause and effect of bank failures. With 2024 being an election year and public belief versus bank bailouts, United States Treasury Secretary Janet Yellen may be hesitant to restore the BTFP. Hayes expects that if adequately big non-TBTF banks deal with serious monetary troubles, Yellen may think about reestablishing the BTFP.
Forecasting a series of bank failures and monetary pressures driven by the interaction of RRP, BTFP, and rate of interest, Hayes anticipates the Fed to react with rate cuts and a possible BTFP renewal. He anticipates a short-term Bitcoin correction by early March and anticipates it to be a lot more serious if area Bitcoin ETFs are authorized.
“Imagine if the anticipation of numerous billions of fiat streaming into these ETFs at a future date moves Bitcoin above $60,000 and near its 2021 all-time high of $70,000. I might quickly see a 30% to 40% correction due to a dollar liquidity carpet pull.”
Hayes stays positive about Bitcoin in the long run. He composed:
“Bitcoin at first will decrease greatly with the wider monetary markets however will rebound before the Fed conference. That is since Bitcoin is the only neutral reserve hard cash that is not a liability of the banking system and is traded internationally.
