Arthur Hayes: Bitcoin will never fall below $20,000 again, and interest rate hikes will lead to a new round of bull market

Arthur Hayes

2023-06-03 16:34

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BlockBeats news, on June 3, Arthur Hayes, co-founder and former CEO of BitMEX, said in a post that he believed inflation would reach a phased low this summer and re-accelerate at the end of the year, and the Fed's 2% core inflation target would not be achieved in 2023.

Debt, Arthur Hayes believes that due to the huge welfare spending, the US federal government will not only fail to reduce the deficit, but the figure will continue to rise, and it is estimated that the deficit of 1 to 2 trillion US dollars per year will become the norm in the next decade. Foreigners will gradually become net sellers of US Treasury bonds (UST), and people's marginal demand for US dollars and UST will gradually decline. If a large amount of debt is to be sold, non-US investors cannot be expected to buy it.

Banking, Arthur Hayes believes that banks can only sell assets (USTs, mortgages, auto loans, commercial real estate loans, etc.) at huge losses, and then raise deposit rates to attract customers back to the bank. Or do nothing, and when depositors flee, they have to exchange the bank's assets with the Federal Reserve for newly printed dollars.

Monetary policy, Arthur Hayes believes that the Federal Reserve is now struggling. Under the current environment and policies, raising interest rates may be equivalent to increasing the money supply, so raising interest rates will actually increase inflation.

Based on the above judgment on the economic situation, Arthur Hayes analyzed that the US debt ceiling will be raised this summer. This allows the US Treasury to start issuing bonds to fund the government. As the Treasury Account Balance (TGA) increases, bond issuance may temporarily consume US dollar liquidity. But over time, the Treasury starts spending money, TGA declines, and US dollar liquidity will increase. Inflation will bottom out and begin to slowly rise. This means that the Fed may pause rate hikes in June, but will start raising rates again at its July meeting, and the policy rate may be close to 6% when the Jackson Hole Central Bank Governors Conference is held in late August.

Bank users will continue to deposit their money in banks that are too big to fail. Big banks will deposit any additional funds they receive at the Federal Reserve, which will increase the amount of money printed by the Federal Reserve. The new money is used to pay interest on the money deposited in these facilities, and the amount of US dollar liquidity injected into the system every day will continue to grow. When wealthy asset holders have more money than they need, they will invest their funds in risky assets, and assets such as gold, Bitcoin, and artificial intelligence technology stocks will benefit from this.

Arthur Hayes expects Bitcoin to stabilize at current prices and does not believe the price will retest $20,000 or anywhere near that price. As funds slowly flow into global risk asset markets, a strong support base will form. Volatility and trading volume this summer will be disappointing, and investors who are tired of this will temporarily exit crypto trading. Personally, will slowly increase its allocation to Bitcoin after covering its position at TGA.