Arthur Hayes Predicts Crypto Bull Run as Fed Tips for $4.4 Trillion QE
Arthur Hayes, the co-founder of BitMEX, has suggested that a cryptocurrency bull run could 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 claims 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, combined with low interest rates, will create a significant inflationary environment. This, in turn, is likely to prompt more investors to allocate their capital to cryptocurrencies, which are seen as a hedge against inflation. Hayes suggests that the ongoing COVID-19 pandemic, combined 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 money for asset speculators has fallen to zero, encouraging risk-taking, and the Bull Market has played a significant role in the financial boom that followed.
The Fed’s tightening cycle and cryptocurrencies
The banks have contributed 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 rate risk, which means that the highest rated credit one can invest in is the debt of the US government.
Many banks have taken measures to increase earnings by taking on a certain degree of credit and/or duration risk. However, this could lead to a decline in the price of bonds due to an increased risk of companies not paying their bills.
Hayes believes the Fed’s tightening cycle could cause a significant economic disruption, followed by a resumption of money printing. He predicts that the Fed will continue to hike until they break something, and some analysts have argued that a disruption in 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, combined with the Fed’s economic policies, will continue to drive interest in cryptocurrencies. The Fed’s $4.4 trillion quantitative easing program, combined with low interest rates, will create a significant inflationary environment. This, in turn, is likely to prompt more investors to allocate their capital to cryptocurrencies, which are seen as a hedge against inflation.
