According to BitMEX’s co-founder Arthur Hayes, the upcoming Bitcoin halving and the monetary measures taken by the Federal Reserve and Treasury will fuel a frenzy of crypto asset sales and potentially cause a market downturn lasting for several weeks.
In a blog post on April 8, Hayes expressed his conviction that the Bitcoin halving would lead to price increases in the short term. However, he issued a caution that crypto market values just prior and subsequent to the event could experience declines.
“The belief that cryptocurrency prices benefit from the halving event is widely accepted. However, it’s important to note that when the majority of traders anticipate a particular result, the opposite often happens instead,” he pointed out.
According to Hayes, the Bitcoin halving occurs when there’s less dollar liquidity available than typical. He elaborated on how the Federal Reserve and U.S. Treasury actions influence market conditions.
“That is why I believe Bitcoin and crypto prices in general will slump around the halving […] It will add propellant to a raging firesale of crypto assets.”
“Is it possible that the market goes against my bearish views and advances further? Absolutely! I’m deeply invested in cryptocurrencies, so I’m happy to be proven wrong.”
During the second half of April, Hayes warned that risky assets could face instability due to several factors. These include the U.S. tax payments which reduce liquidity in the market, the Federal Reserve initiating Quantitative Tightening (QT), a process that decreases the money supply, and the Treasury’s General Account (TGA) remaining untouched.
Starting from May 1, Hayes predicted that the Fed would slow down its rate of narrowing the money supply following their meeting on that day. Additionally, it’s anticipated that the Treasury will inject around an extra $1 trillion into the market through the TGA, thereby enhancing liquidity.
Hayes explained that the upcoming halving and the actions of the Federal Reserve and Treasury are the reasons behind his decision to halt trading until May.
According to CryptoMoon Markets Pro, Bitcoin’s (BTC) value has increased by more than 61% since the start of the year. The cryptocurrency went from approximately $42,200 to currently trade at around $71,170.
The Crypto Fear & Greed Index, which gauges market sentiment toward cryptocurrencies, has risen significantly over the past few weeks and currently sits in the “Greed” zone with a score exceeding 50 out of a maximum 100 points since January 27th.
The score for April 9 showed “Extreme Greed” with a score of 80, up from 76 the day prior.
In the beginning of the year, the score was at 65, representing “Greed.” However, it reached an all-time high of 90 on March 5, which was the highest it had been in the past two years.
If Hayes’ hypothesized liquidity situations materialize, they would significantly boost his conviction to invest in various questionable assets.
“He mentioned that missing out on a few percentage points of profits but avoiding any losses is still a satisfactory result for both my portfolio and lifestyle.”
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2024-04-09 05:50