Arthur Hayes expects Bitcoin rally after ending short position

Arthur Hayes, the former CEO of BitMEX, has predicted a potential rally for Bitcoin (CRYPTO:BTC) following his decision to close a short position.

Hayes, who initially anticipated a significant price correction over the weekend, had warned on September 6 that Bitcoin could fall below the $50,000 psychological level.

However, he reversed his position two days later, signaling optimism about Bitcoin’s short-term prospects.

In a post on September 8, Hayes announced the closure of his Bitcoin short, noting a modest 3% profit.

He hinted at a potential Bitcoin rally as early as next week, suggesting that increased liquidity from the Federal Reserve could drive the price higher.

Hayes referenced U.S. Treasury Secretary Janet Yellen, stating that she might be prepared to inject more liquidity if financial markets continue to decline.

Hayes' outlook is rooted in the possibility of increased dollar liquidity in response to economic weakness.

He noted that if traditional markets see more downside, it could trigger the Federal Reserve to intervene by printing more money, which may bolster Bitcoin's price.

Jamie Coutts, the chief crypto analyst at Real Vision, also supported the idea of a Bitcoin rally linked to liquidity injections.

He pointed out that Bitcoin’s price movements often correlate with shifts in the M2 money supply, a measure of all cash and short-term deposits in the U.S.

Coutts highlighted that the rate of change in the money supply is crucial, with Bitcoin typically moving in tandem with changes in M2 momentum.

In May, the M2 money supply showed its first positive year-over-year growth since November 2023, which could signal a shift in investor sentiment toward hedging against inflation with assets like Bitcoin.

Despite recent fears of a potential drop below $50,000, some analysts remain optimistic about Bitcoin's outlook.

Popular analyst Rekt Capital noted that Bitcoin’s September price movements are consistent with previous bull cycles, including the halving cycle.

For instance, in September 2021, Bitcoin experienced a 7% decline but then rallied 39% in October.

September has historically been a volatile month for Bitcoin, with average returns of -4.69%, making it the most bearish month, according to CoinGlass data.

However, market watchers like Hayes and others suggest that conditions might soon favor a reversal, potentially setting the stage for a rally in the coming weeks.

At press time, the Bitcoin (BTC) price was $55,048.71.