In his newest market evaluation titled “Sugar High”, BitMEX founder Arthur Hayes lists 4 causes to be bullish on Bitcoin and the broader crypto market within the last quarter of 2024.
Hayes opens his evaluation with a metaphorical comparability of his snowboarding weight-reduction plan to the fiscal approaches of main central banks. He likens fast power snacks to short-term financial coverage changes, significantly the rate of interest cuts by the US Federal Reserve, the Bank of England, and the European Central Bank. These cuts, he argues, are like “sugar highs”—they increase asset costs quickly however have to be balanced with extra sustainable monetary insurance policies, akin to “real food” in his analogy.
This pivotal financial coverage shift after Federal Reserve Chairman Jerome Powell’s announcement on the Jackson Hole symposium, triggered a optimistic response available in the market, aligning with Hayes’s prediction. He means that the anticipation of decrease charges makes belongings priced in fiat currencies with fastened provides, reminiscent of Bitcoin, extra enticing, therefore boosting their worth. He explains, “Investors believe that if money is cheaper, assets priced in fiat dollars of fixed supply should rise. I agree.”
However, Hayes cautions in regards to the potential dangers of a yen carry commerce unwind, which may disrupt the markets. He explains that the anticipated future fee cuts by the Fed, BOE, and ECB may cut back the rate of interest differential between these currencies and the yen, posing a danger of destabilizing monetary markets.
Hayes argues that except actual financial measures, akin to his “real food” throughout ski touring, are taken by central banks—particularly increasing their steadiness sheets and interesting in quantitative easing—there may very well be adverse repercussions for the market. (*4*) that the filthy fiat monetary markets require to exist,” he provides.
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To additional solidify his argument, Hayes references the US financial system’s resilience. He notes that the US has solely skilled two quarters of adverse actual GDP progress because the onset of the COVID-19 pandemic, which he argues will not be indicative of an financial system that requires additional fee cuts. “Even the most recent estimation of 3Q2024 real GDP is a solid +2.0%. Again, this is not an economy suffering from overly restrictive interest rates,” Hayes argues.
4 Reasons To Be Bullish On Bitcoin In Q4
This assertion challenges the Fed’s present trajectory in the direction of reducing charges, suggesting that it may be extra politically motivated fairly than based mostly on financial necessity. In gentle of this, Hayes presents 4 key causes to bullish on Bitcoin and the broader crypto market in Q4.
1. Global Central Bank Policies: Hayes highlights the present development of main central banks, that are reducing charges to stimulate their economies regardless of ongoing inflation and progress. “Central banks globally, now led by the Fed, are reducing the price of money. The Fed is cutting rates while inflation is above their target, and the US economy continues to grow. The BOE and ECB will likely continue cutting rates at their upcoming meetings,” Hayes writes.
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2. Increased Dollar Liquidity: The US Treasury, beneath Secretary Janet Yellen, is ready to inject vital liquidity into the monetary markets by the issuance of $271 billion in Treasury payments and a further $30 billion in buybacks. This enhance in greenback liquidity, totaling round $301 billion by year-end, is predicted to maintain monetary markets buoyant and will result in elevated flows into Bitcoin and crypto as traders search increased returns.
3. Strategic Treasury General Account Usage: Approximately $740 billion stays within the US Treasury General Account (TGA), which Hayes suggests might be strategically deployed to help market situations favorable for the present administration. This substantial monetary maneuvering functionality may additional improve market liquidity, not directly benefiting belongings like Bitcoin that thrive in environments of excessive liquidity.
4. Bank Of Japan’s Cautious Approach To Interest Rates: The BOJ’s latest apprehensive stance in the direction of elevating rates of interest, significantly after observing the affect of a minor fee hike on July 31, 2024, indicators a cautious strategy that can take into account market reactions intently. This cautiousness, meant to keep away from destabilizing markets, suggests a world atmosphere the place central banks may prioritize market stability over tightening, which once more bodes effectively for Bitcoin and crypto.
Hayes concludes that the mix of those elements creates a fertile floor for Bitcoin’s progress. As central banks globally lean in the direction of insurance policies that enhance liquidity and cut back the attractiveness of holding fiat currencies, Bitcoin stands out as a finite provide asset that might doubtlessly skyrocket in worth.
“Some worry that the Fed reducing charges is a number one indicator of a US and, by extension, developed market recession. That may be true, however […] they are going to ramp up the cash printer and dramatically enhance the cash provide. That results in inflation, which may very well be dangerous for sure sorts of companies. But for belongings in finite provide like Bitcoin, it would present a visit at lightspeed 2 Da Moon! Hayes states.
At press time, BTC traded at $60,094.
Featured picture created with DALL.E, chart from TradingView.com