BitMEX co-founder Arthur Hayes opined at the #Token2049 event on Wednesday that Bitcoin and the entire crypto market will crash in the days following the Federal Reserve's interest rate cut. He noted that the Fed's recent 50 basis point rate cut, as well as a possible 25 basis point cut, are happening against the backdrop of slowing inflation and a weakening labor market.
Hayes: Fed rate cut will lead to a crypto market crash
Speaking at the Token2049 conference on September 18, Hayes spoke about macroeconomic trends and their impact on the crypto market. In his opinion, the Fed's actions related to lowering interest rates could crash markets, including Bitcoin and cryptocurrencies. Hayes believes that the probability of a 50 basis point rate cut is 60-70%, but he believes that this would be a mistake for the Fed in the current situation. According to CME FedWatch, the Fed plans to cut rates by 125 basis points by the end of the year.
Hayes said markets could collapse within days of the rate cut because it would narrow the interest rate gap between the U.S. dollar and the Japanese yen. He also pointed out that hedge funds and big investors had previously nearly triggered a financial crisis by unwinding their yen carry trades when the Bank of Japan raised interest rates.
Impact on the market
CoinGape Media echoes Hayes’s forecast, noting that economists expect the Bank of Japan to raise rates as early as October, which could lead to volatility and uncertainty in the market. Hayes also pointed out that Treasury bill yields have been hovering around 5.5% for more than a year now, after the Fed ended its rate hike cycle. This has discouraged investors from gravitating toward lower-yielding assets, which Hayes believes is one reason for Ethereum’s low price.
The US dollar index (DXY) has risen above 101 points, and the yield on the 10-year US Treasury note is at 3.717%, above a 15-month low, as investors are now actively awaiting the Federal Reserve's monetary policy decisions.
Forecast for Ethereum
Hayes believes that Ethereum will become a more attractive asset once Treasury yields fall as a result of the Fed's rate cuts. He recommends that investors consider buying Ethereum, as well as sustainable yield products such as Pendle and USDe Ethena.
ETFs and Investments
Arthur Hayes also suggested an interesting idea for investors: buying Treasury bonds and creating legal structures through which interest on such bonds would be paid. He recently spoke about the recovery of the crypto market after the fall in BTC prices, noting that he closed his short position on Bitcoin after US Treasury Secretary Janet Yellen’s statement on crypto market regulation.
