Arthur Hayes explains why Fed rate cuts aren’t helping Bitcoin

Arthur Hayes, co-founder and former CEO of BitMEX, recently shared his views on why the anticipated interest rate cuts by the U.S. Federal Reserve may not benefit Bitcoin as much as expected.

In a post on X on Sept. 2, Hayes noted that despite Federal Reserve Chair Jerome Powell hinting at a potential rate cut in his Jackson Hole speech on Aug. 23, Bitcoin prices have struggled, experiencing a decline since then.

Following Powell's speech, Bitcoin briefly surged to $64,000, but by Sept. 2, it had dropped 10% to a low of $57,400. It has since recovered slightly, trading at $59,238 as of Sept. 3.

This shift reduces the amount of money available for riskier assets like cryptocurrencies, Hayes explained.

An X account named "ELI5 of TLDR" further clarified that the RRP program acts as a temporary parking spot for cash, offering higher returns than other safe investments, thereby keeping capital out of broader circulation.

Since the Fed announced the likelihood of a September rate cut, an additional $120 billion has flowed into RRPs, according to Hayes. This trend contradicts the common belief that lower interest rates typically benefit high-risk assets like Bitcoin.

Many expect that lower interest rates encourage borrowing and spending, which would typically increase market liquidity and make interest-bearing accounts less attractive. Additionally, a weaker dollar is often seen as a positive for Bitcoin, as it may enhance its appeal.

According to the CME Fed Watch tool, there's currently a 69% chance of a 25 basis point rate cut and a 31% chance of a 50 basis point cut at the Fed’s Sept. 18 meeting. A larger cut could indicate a more aggressive approach by the Fed, potentially triggering a stronger market reaction and a boost to economic activity.

https://instagram.com/bitcoin.info.9/ - Main page 

https://instagram.com/bitcoin.info/ - Reserve page