As the crypto market continues its bullish streak, Arthur Hayes, co-founder of BitMEX, has voiced caution, predicting a substantial correction for Bitcoin. In a recent blog post, Hayes shares his insights on the current state of the market, emphasizing the need for vigilance amidst a potentially tumultuous period.
Meanwhile, with Bitcoin reaching unprecedented highs and the prospect of US-listed Spot Bitcoin ETFs entering the scene, Hayes anticipates a correction of as much as 40%, driven by the dynamics of dollar liquidity.
Arthur Hayes Analyzes Market Dynamics & Potential Impact
In his recent blog, Arthur Hayes sheds light on the delicate dance of the cryptocurrency market and the broader financial landscape. Notably, Hayes strategically deploys capital, preparing for what he anticipates as a “vicious washout of all the crypto tourists in March of this year.”
Meanwhile, the co-founder points to critical variables shaping his forecast, which include the Reverse Repo Program (RRP) Decline, the Bank Term Funding Program (BTFP), and the Federal Reserve’s Policy Rate Cuts. Notably, Hayes keenly observes the decline in RRP balance, predicting it to hit $200 billion in early March. This, he believes, will trigger questions about the next source of dollar liquidity, potentially impacting the crypto market.
On the other hand, he highlighted the March 12th deadline, speculating on the renewal of BTFP and its potential consequences for liquidity. According to him, the decision hinges on United States Secretary of the Treasury, Janet Yellen’s call, with implications for the stability of the American banking system.
Simultaneously, March’s Federal Reserve meeting, expected to conclude on the 20th, introduces another variable. Arthur Hayes anticipates the market’s response to the Fed’s potential rate cut, emphasizing the codependency of these factors.
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Potential Bitcoin Correction
Arthur Hayes anticipates a 20% to 30% healthy correction for Bitcoin by early March. Notably, Hayes suggests the correction might be more severe if US-listed spot Bitcoin ETFs start trading, projecting a scenario where Bitcoin surges above $60,000.
Meanwhile, with the anticipation of significant fiat inflow into these ETFs, and Bitcoin nearing the 2021 all-time high of $70,000, Hayes envisions a potential 30% to 40% correction, attributing it to a “dollar liquidity rug pull”. Expressing caution, he refrains from buying Bitcoin until the decision dates in March have passed, highlighting the influence of ETF trading and the associated liquidity dynamics on the cryptocurrency’s short-term trajectory.
In addition, he plans to navigate this scenario by purchasing Bitcoin puts, a move he deems a trading position rather than a hedge. The trading strategy involves timing the market, entering in late February, and purchasing puts expiring on June 28th.
As the crypto market marches forward, Arthur Hayes’ insights serve as a compass, guiding investors through the intricate dance of global financial dynamics. With potential storm clouds on the horizon, Hayes urges vigilance and strategic decision-making in the unpredictable world of cryptocurrency trading.
Also Read: Bitcoin Halving Nears 100 Day Countdown; BTC Price Rally To Begin?
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
