As the Bitcoin halving approaches, Arthur Hayes, co-founder of BitMEX, predicts in his latest article that the current tightening of US dollar liquidity will put pressure on Bitcoin and the overall cryptocurrency market, resulting in a decline in prices before and after the halving.
Facing the upcoming halving of Bitcoin, Arthur Hayes, co-founder of BitMEX, stated in his latest article that this significant event is happening during a period of relatively tight US dollar liquidity. He expects this to add fuel to the “great sell-off of crypto assets” and create pressure on the cryptocurrency market in the coming weeks.
Arthur Hayes points out that the scheduled Bitcoin block reward halving on April 20 is usually seen as a major bullish factor for the cryptocurrency market. Although he acknowledges that this event will drive prices up in the medium term, he also warns market participants that the price trend before and after the halving may be negative.
This has led Arthur Hayes to decide not to make any trades until May. He states that even though this may mean missing out on a few percentage points of potential returns, ensuring the avoidance of losses is a worthwhile decision for him.
Arthur Hayes also welcomes the market to prove him wrong and believes that liquidity will improve in May. He highlights several reasons for this:
1. Slowing down the pace of quantitative tightening (QT): Arthur Hayes expects that at the beginning of May, the Fed will announce a slowdown in QT. QT refers to the process of the Fed reducing the size of its balance sheet, which usually decreases US dollar liquidity in the market. Slowing down QT, specifically reducing the quantity of bonds that are no longer reinvested each month, will slow down the absorption of US dollar liquidity and provide more liquidity to the market.
2. Utilizing the Treasury General Account (TGA): Arthur Hayes mentions that the US Treasury may start using funds from its TGA, which he estimates will amount to $1 trillion, for expenditures to increase market liquidity. The TGA is the US government’s account in the Federal Reserve System used for day-to-day operational expenses. With an expected increase in the TGA balance following an increase in tax revenues, these funds will be released back into the market through government spending (such as tax cuts or increased government expenditures), thereby increasing liquidity.
3. End of the US tax season: Mid-April is the deadline for tax payments in the US, which usually leads to a withdrawal of liquidity from the market. Arthur Hayes believes that once the tax season is over, the pressure on liquidity taken out of the market will ease.
4. US election year policies: Arthur Hayes emphasizes that as it is an election year in the US, the government is expected to stimulate the economy by increasing market liquidity to improve the perception of voters and support the chances of re-election for the incumbent government.
In conclusion, considering the above factors, Arthur Hayes believes that although liquidity may face pressure in April, market liquidity will improve from May due to policy support and changes in seasonal factors. This may have a positive impact on risk asset markets, including cryptocurrencies and stocks. However, we will soon find out what the trend of BTC will be before and after the halving.
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