Crypto Warning: Arthur Hayes Foresees Short-Term Market Crash Linked To Interest Rate Cuts

Former BitMEX CEO Arthur Hayes thinks the upcoming rate of interest cuts by the US Federal Reserve (Fed) might ignite a short-term crypto market crash.

Fed Is Doing A Colossal Mistake, Hayes Says

Delivering a presentation titled ‘Ideas on Macroeconomic Present Occasions’, on the Token2049 occasion in Singapore on September 18, Hayes indicated he isn’t too excited concerning the Fed’s resolution to slash rates of interest. Hayes stated:

I feel the Fed is making a colossal mistake reducing charges at a time when the US authorities is printing and spending as a lot cash as they ever have at peace time. Whereas I feel lots of people are trying ahead to a fee minimize, that means that they assume the inventory market and different issues are going to pump up the jam, I feel the markets are going to break down a number of days after the Fed’s charges.

Whereas delivering the presentation, the serial digital belongings entrepreneur pointed to a chart exhibiting that just about 50% of the central banks on the planet at the moment are in rate-cutting mode. Hayes opined that the Fed could minimize charges by 50 or 75 foundation factors (bps), which could slim the rate of interest differential between the US greenback (USD) and the Japanese yen (JPY) and culminate in a wider market drawdown. He famous:

We noticed what occurred a number of weeks in the past when the yen went from 162 to about 142, over about 14 days of buying and selling that triggered virtually a mini monetary collapse,” the previous BitMEX exec stated, including: “We’re going to see a revisit of that monetary stress.

So as to add benefit to his prediction, Hayes juxtaposed investing in digital currencies with holding 5%-yielding Treasury Payments (T-bills). He stated that traders would a lot moderately put their cash into government-backed T-bills throughout market turmoil than riskier decentralized finance (DeFi) purposes. Hayes harassed that revenue yields in lots of crypto belongings are ‘both barely above or beneath the speed of T-bills’.

Nonetheless, Hayes was not solely dismissive of holding cryptocurrencies in a declining rate of interest atmosphere. He analyzed returns generated by 4 cryptocurrencies, specifically Ethereum (ETH), Ethena (ENA), Pendle (PENDLE), and Ondo (ONDO). Hayes emphasised that he has important holdings in three cryptocurrencies besides ONDO.

Hayes Assured In Ethereum Regardless of Weak Efficiency

Hayes stated the present excessive rate of interest atmosphere is having a extreme affect on monetary markets around the globe, together with crypto markets. Taking the instance of Ethereum, Hayes stated its staking yields of 3-4% aren’t enticing sufficient for traders to disregard T-bills yielding 5.5% with none threat in any way. 

Hayes went so far as calling Ethereum an ‘web bond’, which isn’t too shocking since all through 2024 ETH has persistently underperformed towards most different main cryptocurrencies like Bitcoin (BTC), Solana (SOL), Binance Coin (BNB), and others. 

Nonetheless, Hayes added that with a speedy fall in rates of interest, the prospects of an Ethereum bull market would enhance. Nonetheless, the attractiveness of digital belongings will rely quite a bit on T-bills yields falling at a good better tempo. Hayes added that regardless of the headwinds confronted by Ethereum, he nonetheless invests in it.

Hayes isn’t the one crypto fanatic with skepticism towards rate of interest cuts. One other crypto market knowledgeable just lately asserted that the Fed’s resolution to chop charges might result in market sell-offs and corrections. Bitcoin trades at $59,746 at press time, up 1.2% within the final 24 hours.

Featured Picture from Unsplash.com, Chart from TradingView.com