Arthur Hayes: Bearish in the short term, but won't sell cryptocurrencies because of it

BlockBeats reports that on September 4, BitMEX co-founder Arthur Hayes deeply analyzed the profound impact of current Federal Reserve policy and fiscal environment on the market in his latest blog post. He pointed out that despite the Fed's efforts to curb inflation through continuous rate hikes since 2022, massive government spending remains a major cause of high inflation. Hayes believes that due to political pressure and election cycles, it is difficult for the government to significantly cut spending or raise taxes, which will lead to continued economic uncertainty under dual pressures of inflation and growth. Faced with this situation, the Fed may no longer further increase interest rates while markets might adjust interest rate levels themselves to cope with high debt financing costs; yields on 10-year U.S. Treasury bonds could climb back up to 5%, triggering a new round of fluctuations in financial markets.

Hayes particularly emphasized that current uncertainties about Federal Reserve policies have significant impacts on cryptocurrency markets. He noted that Bitcoin prices have become one of the most sensitive indicators of dollar liquidity conditions. Between Fed's interest rate policies and Treasury Department's liquidity operations, price volatility in cryptocurrencies like Bitcoin has shown deep linkage with traditional financial markets. With potential cuts by the Fed again in 2024 leading to increased concerns over US bond yields, investors are likely paying more attention towards how dollar liquidity affects crypto asset prices. Hayes thinks if interest rates rise again and market liquidity tightens up, Bitcoin along other cryptocurrencies might face another round of price corrections.

Furthermore, Hayes suggested that U.S Secretary Janet Yellen could issue more short-term treasury bills (T-bills) and adjust fiscal policies as measures against market instability aiming at increasing market liquidity so as not let financial system fall into trouble due rising debt costs.Hayes predicts these actions would greatly affect risk assets including cryptocurrencies.Once signals indicating increased liquidity are released from US Treasury department,cryptocurrency markets might welcome new opportunities for growth.Especially when global central bank policies continue to fluctuate,cryptocurrencies are expected to become a major choice for investors seeking hedging and risk aversion.Hayes emphasized that although Bitcoin prices might fluctuate in the short term due to liquidity tightening, in the long run, as liquidity is re-injected into the market, a bull market for cryptocurrencies could potentially restart.

Hayes stated,"My shifting views keep my hand hovering over the buy button. I won't sell cryptocurrency because of short-term bearishness. As I explained, my bearishness is only temporary."