• Arthur Hayes, former CEO of the BitMEX exchange, predicts a “global financial meltdown” due to future US economic issues.
• Bitcoin’s rally should not be taken as the start of a new bull run, as Hayes warns that crypto assets will “get smoked” when Federal Reserve policy flips from restrictive to liberal.
• Hayes suggests that the removal of half a trillion dollars in 2022 created the worst bond and stock performance in a few hundred years, and that double that amount being removed in 2023 could have catastrophic consequences.
Arthur Hayes, the former CEO of the BitMEX exchange, recently released a blog post discussing the potential of a “global financial meltdown” due to future US economic issues. In this post, he warns that Bitcoin’s current rally should likely not be taken as the start of a new bull run, as crypto assets may “get smoked” when Federal Reserve policy flips from restrictive to liberal.
The US Federal Reserve is currently the focus of practically every crypto analyst this year, as they estimate the likelihood of a policy “pivot” away from quantitative tightening (QT) and interest rate hikes to flat and then decreasing rates, and potentially even quantitative easing (QE). This involves a move away from draining the economy of liquidity to injecting it back in, and while this practice led to new all-time highs for Bitcoin beginning in 2020, the same phenomenon would not be plain sailing next time around, according to Hayes.
He pointed to the reaction of the markets when money is injected vs. withdrawn, noting that it is not symmetrical, and that the law of unintended consequences could result in severe economic issues if the Fed were to remove double the amount of money in 2023 compared to what was removed in 2022. To further support his point, Hayes mentioned that the removal of half a trillion dollars in 2022 resulted in the worst bond and stock performance in a few hundred years.
Hayes concluded by warning investors to prepare for a possible $15K crash in Bitcoin and other risk assets, as the Federal Reserve is forced to abandon quantitative tightening in future. He believes that a move away from restrictive policy could have dangerous implications for the global financial markets, and that investors should be aware of the potential risks.