“If they hit 50, it will be a nuclear catastrophe for financial markets”
In an interview with CoinDesk’s Markets Daily, BitMEX co-founder and Maelstrom CIO Arthur Hayes discussed the impact of the Fed’s rate cut.
“For the Fed to cut rates, when there’s massive government spending, there’s inflation that’s above their target, I think that’s a mistake. Inflation will accelerate in the fourth quarter if they decide to continue cutting rates. And I think the response will be that if markets start to falter, they’re just going to do it more and they’re going to make the problem worse.”
Hayes noted that, "Everyone thinks the markets are going to go up. The more they cut, the more the markets go up with stocks, bonds, crypto, all that kind of stuff. I actually have a contrarian view that, you know, the more they cut, the more the markets are going to dislike it. Maybe a trading day or two after the fact, but they're not going to learn the lesson. They're just going to keep doing more of the same. So we're going to have a very rapid cycle of cuts, so that's my view."
How do you think the crypto markets will react?
The most important macroeconomic variable is the exchange rate between the dollar and the yen. And the dollar exchange rate weakened a lot because the Bank of Japan cut rates to zero or negative levels, and the Federal Reserve and all the other major central banks raised rates starting in March 2022, so the spread widened a lot. The dollar and yen was around 162 on the higher side. And then a few things happened. The Federal Reserve signaled that it was ready to start cutting rates in the summer of this year. And the Bank of Japan signaled that it would start raising rates, and did so by 15 basis points on July 31. And, as we saw in the following week, markets fell 10% worldwide.
