In his newest market analysis titled “Sugar High”, BitMEX founder Arthur Hayes lists 4 causes to be bullish on Bitcoin and the broader crypto market within the closing quarter of 2024.
Hayes opens his evaluation with a metaphorical comparability of his snowboarding weight loss program to the fiscal approaches of main central banks. He likens fast power snacks to short-term financial coverage changes, notably 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 enhance asset costs briefly however have to be balanced with extra sustainable monetary insurance policies, akin to “real food” in his analogy.
This pivotal financial coverage shift after Federal Reserve Chairman Jerome Powell’s announcement on the(*4*), triggered a optimistic response out there, aligning with Hayes’s prediction. He means that the anticipation of decrease charges makes belongings priced in fiat currencies with fastened provides, similar to Bitcoin, extra enticing, therefore boosting their worth. He explains, “Investors believe that if money is cheaper, assets priced in fiat dollars of fixed supply should rise. I agree.”
However, Hayes cautions in regards to the potential dangers of a yen carry trade unwind, which might disrupt the markets. He explains that the anticipated future charge cuts by the Fed, BOE, and ECB might cut back the rate of interest differential between these currencies and the yen, posing a threat of destabilizing monetary markets.
Hayes argues that except actual financial measures, akin to his “real food” throughout ski touring, are taken by central banks—particularly increasing their stability sheets and fascinating in quantitative easing—there may very well be unfavourable repercussions for the market. “If the dollar-yen smashes through 140 on the downside in short order, I don’t believe they will hesitate to provide the “real food” that the filthy fiat monetary markets require to exist,” he provides.
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To additional solidify his argument, Hayes references the US financial system’s resilience. He notes that the US has solely skilled two quarters of unfavourable actual GDP progress for the reason that onset of the COVID-19 pandemic, which he argues is just not indicative of an financial system that requires additional charge cuts. “Even the most recent estimation of 3Q2024 real GDP is a solid +2.0%. Again, this is not an economy suffering from overly restrictive interest rates,” Hayes argues.
4 Reasons To Be Bullish On Bitcoin In Q4
This assertion challenges the Fed’s present trajectory in the direction of reducing charges, suggesting that it may be extra politically motivated reasonably than based mostly on financial necessity. In gentle of this, Hayes presents 4 key causes to bullish on Bitcoin and the broader crypto market in Q4.
1. Global Central Bank Policies: Hayes highlights the present development of main central banks, that are chopping charges to stimulate their economies regardless of ongoing inflation and progress. “Central banks globally, now led by the Fed, are reducing the price of money. The Fed is cutting rates while inflation is above their target, and the US economy continues to grow. The BOE and ECB will likely continue cutting rates at their upcoming meetings,” Hayes writes.
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2. Increased Dollar Liquidity: The US Treasury, underneath Secretary Janet Yellen, is about to inject vital liquidity into the monetary markets by the issuance of $271 billion in Treasury payments and an extra $30 billion in buybacks. This improve in greenback liquidity, totaling round $301 billion by year-end, is predicted to maintain monetary markets buoyant and will result in elevated flows into Bitcoin and crypto as buyers search larger returns.
3. Strategic Treasury General Account Usage: Approximately $740 billion stays within the US Treasury General Account (TGA), which Hayes suggests will likely be strategically deployed to help market situations favorable for the present administration. This substantial monetary maneuvering functionality might additional improve market liquidity, not directly benefiting belongings like Bitcoin that thrive in environments of excessive liquidity.
4. Bank Of Japan’s Cautious Approach To Interest Rates: The BOJ’s current apprehensive stance in the direction of elevating rates of interest, notably after observing the affect of a minor charge hike on July 31, 2024, alerts a cautious strategy that can take into account market reactions carefully. This cautiousness, supposed to keep away from destabilizing markets, suggests a worldwide surroundings the place central banks would possibly prioritize market stability over tightening, which once more bodes properly for Bitcoin and crypto.
Hayes concludes that the mix of those components creates a fertile floor for Bitcoin’s progress. As central banks globally lean in the direction of insurance policies that improve liquidity and cut back the attractiveness of holding fiat currencies, Bitcoin stands out as a finite provide asset that would probably skyrocket in worth.
“Some worry that the Fed chopping charges is a number one indicator of a US and, by extension, developed market recession. That may be true, however […] they’ll ramp up the cash printer and dramatically improve the cash provide. That results in inflation, which may very well be dangerous for sure forms of companies. But for belongings in finite provide like Bitcoin, it is going to present a visit at lightspeed 2 Da Moon! Hayes states.
At press time, BTC traded at $60,094.
Featured picture created with DALL.E, chart from TradingView.com
