Arthur Hayes Foresees Bitcoin Slump During Reward Halving

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Arthur Hayes, a co-founder and ex-CEO of cryptocurrency exchange BitMEX, along with serving as the chief investment officer, predicted that Bitcoin may encounter increased selling activity before and following its scheduled reward halving in April 2023.

Based on “Heatwave,” Hayes’ perspective that reducing the supply of cryptocurrencies could lead to price growth is widely accepted.

In the world of cryptocurrencies, a correction refers to a drop in price by at least 10%. However, optimistic investors look back at Bitcoin‘s history, which shows substantial increases in value over several months after its halving event. This occurrence every four years cuts the creation of new Bitcoins in half, resulting in the current issuance rate being set to 3.125 BTC per block.

Arthur Hayes, the CEO of a significant cryptocurrency exchange, expressed worries about two upcoming events that may impact the market negatively. The first is the U.S. tax deadline on April 15th, which could draw dollars out of the market as investors pay their taxes. The second is the Federal Reserve’s tightening policies, which may further reduce dollar liquidity. This combination could lead to a mass selling off of crypto assets around the time of the halving event.

Commonly, people pay taxes by taking money from their available funds. This withdrawal of funds from the economy can decrease the amount of cash circulating, which may lead to an increase in the value of the US dollar relative to other currencies.

If this occurs, it might result in increased expense for interest on dollars loans for borrowers, causing them to pull back from investing in riskier assets such as cryptocurrencies.

The Treasury General Account (TGA) is highlighted by Hayes as crucial, with forecasted growth in post-tax payments set to significantly boost its balance. This expansion of the TGA balance may worsen the existing liquidity problem. Investors are advised to be cautious from April 15th to May 1st, as this period could prove difficult for risky assets.

Moving forward, Hayes anticipates that Janet Yellen, the Treasury Secretary, may exhaust the TGA before May 1st. If this occurs, it could serve as a favorable signal for risk assets in the period preceding the U.S. presidential election in November. This perspective implies a optimistic viewpoint beyond the short-term liquidity issues.

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2024-04-09 16:54