In his latest market evaluation titled “Sugar High”, BitMEX founder Arthur Hayes lists 4 reasons to be bullish on Bitcoin and the broader crypto market in the ultimate quarter of 2024.
Hayes opens his evaluation with a metaphorical comparison of his skiing weight loss program to the fiscal approaches of major central banks. He likens quick energy snacks to short-term monetary policy adjustments, particularly the rate of interest cuts by the US Federal Reserve, the Bank of England, and the European Central Bank. These cuts, he argues, are like “sugar highs”—they boost asset prices temporarily but should be balanced with more sustainable financial policies, akin to “real food” in his analogy.
This pivotal monetary policy shift after Federal Reserve Chairman Jerome Powell’s announcement on the Jackson Hole symposium, triggered a positive response available in the market, aligning with Hayes’s prediction. He suggests that the anticipation of lower rates makes assets priced in fiat currencies with fixed supplies, equivalent to Bitcoin, more attractive, hence boosting their value. He explains, “Investors consider that if money is cheaper, assets priced in fiat dollars of fixed supply should rise. I agree.”
Nevertheless, Hayes cautions in regards to the potential risks of a yen carry trade unwind, which could disrupt the markets. He explains that the anticipated future rate cuts by the Fed, BOE, and ECB could reduce the rate of interest differential between these currencies and the yen, posing a risk of destabilizing financial markets.
Hayes argues that unless real economic measures, akin to his “real food” during ski touring, are taken by central banks—specifically expanding their balance sheets and fascinating in quantitative easing—there could possibly be negative repercussions for the market. “If the dollar-yen smashes through 140 on the downside in brief order, I don’t consider they are going to hesitate to supply the “real food” that the filthy fiat financial markets require to exist,” he adds.
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To further solidify his argument, Hayes references the US economy’s resilience. He notes that the US has only experienced two quarters of negative real GDP growth for the reason that onset of the COVID-19 pandemic, which he argues isn’t indicative of an economy that requires further rate cuts. “Even essentially the most recent estimation of 3Q2024 real GDP is a solid +2.0%. Again, this isn’t an economy affected by overly restrictive rates of interest,” Hayes argues.
4 Reasons To Be Bullish On Bitcoin In Q4
This assertion challenges the Fed’s current trajectory towards lowering rates, suggesting that it is perhaps more politically motivated relatively than based on economic necessity. In light of this, Hayes presents 4 key reasons to bullish on Bitcoin and the broader crypto market in Q4.
1. Global Central Bank Policies: Hayes highlights the present trend of major central banks, that are cutting rates to stimulate their economies despite ongoing inflation and growth. “Central banks globally, now led by the Fed, are reducing the value of cash. The Fed is cutting rates while inflation is above their goal, and the US economy continues to grow. The BOE and ECB will likely proceed cutting rates at their upcoming meetings,” Hayes writes.
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2. Increased Dollar Liquidity: The US Treasury, under Secretary Janet Yellen, is ready to inject significant liquidity into the financial markets through the issuance of $271 billion in Treasury bills and an extra $30 billion in buybacks. This increase in dollar liquidity, totaling around $301 billion by year-end, is predicted to maintain financial markets buoyant and may lead to increased flows into Bitcoin and crypto as investors seek higher returns.
3. Strategic Treasury General Account Usage: Roughly $740 billion stays within the US Treasury General Account (TGA), which Hayes suggests might be strategically deployed to support market conditions favorable for the present administration. This substantial financial maneuvering capability could further enhance market liquidity, not directly benefiting assets like Bitcoin that thrive in environments of high liquidity.
4. Bank Of Japan’s Cautious Approach To Interest Rates: The BOJ’s recent apprehensive stance towards raising rates of interest, particularly after observing the impact of a minor rate hike on July 31, 2024, signals a cautious approach that may consider market reactions closely. This cautiousness, intended to avoid destabilizing markets, suggests a world environment where central banks might prioritize market stability over tightening, which again bodes well for Bitcoin and crypto.
Hayes concludes that the mixture of those aspects creates a fertile ground for Bitcoin’s growth. As central banks globally lean towards policies that increase liquidity and reduce the attractiveness of holding fiat currencies, Bitcoin stands out as a finite supply asset that would potentially skyrocket in value.
“Some fear that the Fed cutting rates is a number one indicator of a US and, by extension, developed market recession. That is perhaps true, but […] they are going to ramp up the cash printer and dramatically increase the cash supply. That results in inflation, which could possibly be bad for certain sorts of businesses. But for assets in finite supply like Bitcoin, it’ll provide a visit at lightspeed 2 Da Moon! Hayes states.
At press time, BTC traded at $60,094.
Bitcoin price, 1-day chart | Source: BTCUSDT on TradingView.com
Featured image created with DALL.E, chart from TradingView.com