2024-9-5 23:06 |
Bitcoin (BTC) could slump further to $50,000, according to former BitMEX CEO Arthur Hayes. In a Wednesday blog post, Hayes shared his revised outlook for Bitcoin’s price movement, contradicting his earlier bullish stance.
In his blog, “Boom Times… Delayed,” Hayes detailed the factors influencing his prediction, warning that cryptocurrency may face a decline due to tightening liquidity conditions. Notably, the pundit highlighted the impact of the Federal Reserve’s monetary policies, particularly its influence on the liquidity available for risk assets like Bitcoin.
“As soon as the Reverse Repo Program (RRP) started rising to the tune of $120 billion, Bitcoin swooned. A rising RRP sterilizes money as it sits inert on the Fed’s balance sheet, unable to be re-leveraged within the global financial system,” wrote Hayes.
The Reverse Repo Program (RRP) is a tool the Federal Reserve uses to manage short-term interest rates and control the money supply in the financial system. When the RRP rate rises, Bitcoin’s price may drop as investors move funds to safer, higher-yield options. If the RRP rate falls, more liquidity enters the market, which can drive Bitcoin’s price up.
He further pointed out that the Federal Reserve’s stance on interest rates and its reluctance to continue hiking rates could lead to further reductions in liquidity, adversely affecting Bitcoin. He also noted that being highly sensitive to dollar liquidity conditions, Bitcoin might struggle to maintain its current levels if the RRP balances continue to rise.
“Assuming the Fed doesn’t cut rates before the September meeting, I expect T-bill yields to stay firmly below those of the RRP. As such, RRP balances should continue to rise, and Bitcoin, at best, will chop around these levels and, at worst, slowly leak lower towards $50,000.” He emphasized.
Hayes also expressed concern over the potential ripple effects on altcoins like Ether, XRP, Cardano, Solana, and the like, predicting they might experience an even worse route. He mentioned that the decline in Bitcoin’s price could trigger a broader sell-off in the altcoin market, exacerbating investors’ losses.
“Between now and then, Bitcoin will, at best, continue to chop, and altcoins could dive deeper into the gutter,” Hayes wrote, underscoring the volatility that could grip the market in the coming weeks.
Interestingly, Hayes’ latest forecast marks a significant departure from his earlier prediction just last month, in which he anticipated Bitcoin rising to $100,000 by the end of the year. In a blog on August 12, Hayes attributed his bullish outlook to expected liquidity injections by the US Treasury and the Federal Reserve.
That said, albeit his current bearish stand, Hayes noted he remains long-term bullish on Bitcoin, emphasizing that he is not selling his crypto holdings but remains poised to buy more at opportune moments.
Bitcoin was trading at $58,032 at press time, reflecting a 0.18% drop over the past 24 hours.
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