BitMEX co-founder Arthur Hayes believes that the US Federal Reserve’s (Fed) interest rate cut will not lead to long-term growth in Bitcoin (BTC).
Last week, Fed Chairman Jerome Powell confirmed that the agency would likely cut its key interest rate in September. History shows that such a decision is definitely bullish for the market. However, according to Arthur Hayes, it is much more complicated.
How Fed Rate Cuts Will Affect Bitcoin: Hayes Analysis
In his last essay Hayes says the market experienced a “sugar rush” after Powell’s words. The balance of risks between high inflation and a potential recession began to tilt toward the latter.
On the one hand, in such conditions, it is easier for investors to take out loans to speculate on riskier investments. For example, on stocks and cryptocurrencies. This is what helped BTC grow 15 times from March 2020 to April 2021.
On the other hand, the weakening of the dollar, euro and British pound will lead to a strengthening of the Japanese yen. According to Hayes, this will cause turbulence in global markets. Investors will start to borrow cheaply from the Bank of Japan and invest them in assets that bring higher returns.
Something similar happened in early August, when the Japanese Central Bank raised the rate to 0.25% for the first time in 17 years. Then Bitcoin briefly fell below $50,000.
Hayes expects the same thing to happen after the U.S. rate cut, with the Fed expanding its balance sheet to flood the economy with more money.
However, the trip to the moon will be short-lived. In addition, Bitcoin and Ethereum (ETH) first need to consolidate above $70,000 and $4,000, respectively, Hayes noted.
According to data CoinGeckoat the time of writing, the top two cryptocurrencies by capitalization are trading at $59,500 and $2,500.
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Source: Cryptocurrency
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