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BitMEX Co-Founder Predicts Market Turbulence, Triggered by Bitcoin Halving

Hayes predicts short-term crypto market turbulence

In a recent blog post, BitMEX co-founder Arthur Hayes shared his thoughts on the potential impact of the 2024 Bitcoin halving on the crypto market. 

Key takeaways:

  1. Arthur Hayes, co-founder of BitMEX, predicts that the Bitcoin halving will lead to a fire sale across the market.
  2. The slump in Bitcoin and crypto prices will occur despite the positive narrative surrounding the event.
  3. He expects the Fed to reduce the pace of money supply tightening and the Treasury to release additional liquidity.

In a recent blog post, BitMEX co-founder Arthur Hayes on why Bitcoin halving matters and how it would affect the crypto market. Hayes believes that combined with actions by the Federal Reserve and Treasury, it will "add propellant to a raging fire sale of crypto assets" and depress the market for weeks.

Although the Bitcoin block reward halving is generally seen as a positive event for crypto prices in the medium term, Hayes warns that the prices directly before and after the event could be negative. He argues that when most market participants agree on a certain outcome, the opposite usually occurs.

Hayes also points out that the event is timed to coincide with a period of tighter dollar liquidity, which could further contribute to the slump in Bitcoin and crypto prices. Despite his bearish inclinations, Hayes acknowledges that the market could defy his expectations and continue to rise, as he remains "perennially long as fuck crypto."

Fed and Treasury actions to impact the market

According to Hayes, the second half of April will be a precarious period for risky assets due to several factors. U.S. tax payments will remove liquidity from the market, while the Federal Reserve starts Quantitative Tightening (QT), decreasing the money supply. Additionally, the Treasury's General Account (TGA), which serves as the government's checking account, has yet to be utilized.

However, Hayes expects the situation to change after May 1, following the Fed's meeting. He anticipates that the Fed will reduce the pace of money supply tightening, and the Treasury will release an additional $1 trillion of liquidity into the system from the TGA, potentially pumping the markets.

Hayes' trading strategy and market sentiment

Given the expected market turbulence, Hayes has decided to abstain from trading until May. He believes that if the liquidity scenarios he theorized come true, it would give him much more confidence to "ape into all manner of dogshit." Hayes prioritizes avoiding losses for his portfolio and lifestyle, even if it means missing out on a few percentage points of gains.

Despite Hayes' cautious outlook, the overall market sentiment remains positive. Bitcoin has experienced a significant year-to-date increase, climbing over 61% from around $42,200 to trade at $71,170. The Crypto Fear & Greed Index has also remained in the "Greed" or "Extreme Greed" range since late January, indicating strong bullish sentiment among market participants.