2022-4-13 22:43 |
BitMEX co-founder Arthur Hayes is predicting a short-term crypto slump as the Nasdaq 100 chart increasingly shows signs of yielding.
In his latest blog on April 11, the former BitMEX C.E.O noted that the depraved state of the global stock market would likely lead to a crypto crash in the second quarter, prompting him to purchase options as a hedge against the impending drop.
Hayes who claimed that current crypto movements are still correlated to US technology stocks also believes that the ongoing warfare in Ukraine could further worsen the situation, stating that cryptocurrencies are “standing on the precipice of a calamitous outcome.”
He argues that the only reason the Nasdaq 100 Index (NDX) which represents big tech hasn’t succumbed quite as badly is only because it is “heavily weighted towards the few profitable tech companies that dominate the market from a market capitalization standpoint.” Companies such as Apple, Amazon Tesla, Google, and Microsoft which make up slightly over 40% of the index have hit new all-time highs in the previous months, buoying up the index.
Currently, the NDX correlation to crypto charts is showing that the short-term (10-day) correlation is high, and the medium-term (30-day and 90-day) correlations are moving up and to the right. “This is not what we want.” Hayes wrote adding that for him “to hoist the flag in support of selling fiat and buying crypto in advance of an NDX meltdown (30% to 50% drawdown), correlations across all time frames need to trend demonstratively lower.” He believes that as long as the 10-day correlation stays high, investors must stay defensive of their crypto positions.
The other argument for a dip is that the Nasdaq 100 failed to break a significant technical level following the FED’s failed attempts to fix the inflation problem. Despite tapping a high of $16,567.50 in late December, Hayes now feels the NDX will drop lower to $10,000 if it loses support at $13,046.64.
That said, he foresees this drop being mirrored in cryptocurrencies with Bitcoin and Ethereum expected to drop as low as $30,000 and $2,500 respectively before the end of June. Hayes stated in a post on April 1 that he is also considering reducing his Bitcoin position to add to Ether and other smaller cryptocurrencies.
He however believes that all cryptocurrencies could slump lower as Q2 advances. “Even though some of these coins are already down 75% from their all-time high, I don’t believe even they can escape the coming crypto carnage,” he says. Hayes is however bullish in the long term and believes that in a three- to five-year horizon, Bitcoin will reach $1 million.
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