Arthur Hayes, the co-founder of BitMEX, has hinted that a cryptocurrency bull run may be on the horizon. In a recent blog post, Hayes discussed the implications of the Federal Reserve’s (Fed) new Bank Term Funding Program (BTFP), which he says stands for “Buy The Fucking Pivot.” Hayes argues that the BTFP program is simply Yield Curve Control (YCC) repackaged in a new, shiny, and more palatable format.
Hayes predicts that the Fed’s $4.4 trillion quantitative easing (QE) program, coupled with its low-interest rates, will create a significant inflationary environment. This, in turn, will likely drive more investors to allocate their capital to cryptocurrencies, which are seen as a hedge against inflation. Hayes suggests that the ongoing COVID-19 pandemic, coupled with the Fed’s economic policies, will continue to drive interest in cryptocurrencies.
The US Federal Government’s decision to increase its fiscal deficit in response to the pandemic has already been highly inflationary, as the government has dropped money directly into people’s bank accounts. The cost of funds for asset speculators has dropped to zero, encouraging risk-taking, and the Bull Market has played a significant role in the financial boom that followed.
Fed’s Tightening Cycle and Cryptocurrencies
Banks have been contributing to the spread of interest rates by depositing money with the Fed and earning interest on excess reserves. This has led to an increase in interest risk, meaning that the highest-rated credit one can invest in is the debt of the US government.
Many banks have taken measures to increase their earnings by taking on some level of credit and/or duration risk. However, this can lead to a decrease in the price of bonds due to the increased risk of companies not paying their bills.
Hayes believes that the Fed’s tightening cycle could cause a significant financial disturbance, followed by a resumption of money printing. He predicts that the Fed will continue to hike until they break something, and some analysts have maintained that a disruption in some part of the US financial system in 2023 will force the Fed to reverse the tightening cycle. Hayes argues that this could be the catalyst for a crypto bull run.
Inflation and Cryptocurrencies
Hayes suggests that the ongoing COVID-19 pandemic, coupled with the Fed’s economic policies, will continue to drive interest in cryptocurrencies. The Fed’s $4.4 trillion quantitative easing program, coupled with its low-interest rates, will create a significant inflationary environment. This, in turn, will likely drive more investors to allocate their capital to cryptocurrencies, which are seen as a hedge against inflation.
