Arthur Hayes, co-founder of BitMEX and Chief Information Officer of Maelstrom, has expressed concern over the upcoming Federal Reserve interest rate cut, scheduled to be discussed on September 18. Hayes anticipates that this decision could trigger a significant market crash, with a recovery led by a subsequent bull run.
Speaking at the TOKEN2049 event in Singapore, Hayes shared his insights on macroeconomic trends and the potential consequences of the Federal Reserveâs monetary policy. His keynote speech, titled âThoughts on Macroeconomics Current Events,â highlighted the possible impact of the Fedâs actions on both traditional and cryptocurrency markets.
Federal reserveâs interest rate cut
The Federal Reserve is expected to implement an interest rate cut after reviewing the recent Employment Report released by the U.S. Labor Department on September 6. This rate cut, expected to be announced at the Federal Open Market Committee (FOMC) meeting on September 17 and 18, would mark the Fedâs first reduction in four years since the onset of the COVID-19 pandemic.
Many economists have speculated that the Fed will opt for a 25-basis-point cut, although some analysts suggest a larger 50-basis-point or even a 75-basis-point cut may be possible. If the Fed moves forward with a 25-basis-point reduction, several experts, including Johns Hopkins University economist Steve Hanke, believe this could result in a short-term decline in Bitcoin and other high-risk assets due to a âsell the newsâ event.
Arthur Hayes: a Fed rate cut could crash the marketIs it really likely to happen anytime soon?About this & Which tokens to look out for Arthur Hayes, co-founder of BitMEX and CIO at Maelstrom, shared his views on the macroeconomic outlook and its impact on crypto markets⊠pic.twitter.com/7xrxZ5mzz4
â Depression (@0xDepressionn) September 18, 2024
Hayes questions the Fedâs decision
Arthur Hayes has repeatedly questioned the Fedâs decision to reduce interest rates, pointing to concerns about inflation and government spending. According to Hayes, the U.S. governmentâs aggressive minting and spending of U.S. dollars have pushed inflation to levels above the Fedâs neutral rate. Currently, inflation is estimated to be 150 to 200 basis points higher than the central bank considers sustainable.
Hayes suggested a more significant rate cut, between 50 and 75 basis points, could be necessary. However, he expressed caution about the implications of lower interest rates, warning that making borrowing cheaper could fuel further inflation. He also noted that a lower interest rate could diminish the interest rate gap between the U.S. dollar and the Japanese yen, potentially weakening the dollar while strengthening the yen.
Cryptocurrencies could overtake treasury bills
In his keynote address, Hayes also compared the yields offered by Treasury bills to those available in the cryptocurrency market. He noted that Treasury bills offer higher returns than many cryptocurrencies, but this could change if Treasury yields fall due to the Fedâs rate cuts.
Hayes highlighted Ethereum and several other crypto assets, including Ether.fi, Ethena, and Pendle, as potential beneficiaries of the expected drop in Treasury yields. He pointed to projects like Bitcoin staking, Ethereum staking, and Pendle as ones that could outperform traditional Treasury investments. On the other hand, Hayes expressed skepticism about real-world assets (RWAs), such as Ondo, suggesting that investors may lose interest in them if Treasury bills become less attractive.
In defending Ethereum against criticism of its performance, Hayes described it as the âInternet Bondâ with a yield of up to 4%, asserting that Ethereum could play a key role in driving the next market rally following a potential downturn.
The post Arthur Hayes Predicts Market Crash Following Fed Interest Rate Cut first appeared on Coinfea.
