A previously risk-averse investor; He says there is a solid “buying opportunity” for Bitcoin, Ethereum and even emerging altcoins. Arthur Hayes, one of the well-known names in the industry, announced in a blog post on February 8 that he has made a “U-turn” in his current crypto investment plans. Here are the details…
Hayes changes his stance on altcoins
The current macroeconomic conditions stemming from the US Fed, as we reported on cryptokoin.com, had previously made Arthur Hayes willing to avoid what he termed “risky assets”. As inflation slows in line with the Fed’s rate hikes, multiple new storms are brewing in the US, and the Fed says, “The US Congress and the Treasury Department will steer the economy as they see fit.”
The problem lies in predicting how these events will turn out throughout the year. For Hayes, 2023 could split the space for crypto in two. This comes as the antithesis of a previous thesis in mid-January, which the former BitMEX CEO said he was abstaining from due to fears of a Fed-driven capitulation event that hit risky assets. BitMEX CEO used the following statements:
Concerns about this possible outcome, which I likely prevented from happening in 2023, led me to keep my reserve capital in money market funds and short-term US Treasury bonds. Therefore, the portion of my liquid capital that I intend to eventually use to buy crypto is missing from the current rally we see at local lows. Bitcoin is up close to 50% from the $16,000 lows we saw with the FTX crash.
What does the economic outlook in the US indicate?
Comparing the risky asset landscape to 2009 and the beginning of quantitative easing, Hayes continued that despite the 40 percent increase in January alone, Bitcoin is probably far from recovering. This year the picture is quite complex. Quantitative easing has given way to quantitative tightening, which draws liquidity from the US financial system at the expense of risk assets. Up to $500 billion of cash in the Treasury General Account (TGA) will be drained, and the $100 billion in liquidity the Fed withdraws monthly will be cancelled. Hayes’ blog post includes the following statements:
TGA will run out sometime in the middle of the year. Right after it’s gone, there will be a political circus around raising the debt limit in the US. Given that the Western-led fiat financial system will collapse overnight, we can assume that the debt ceiling will be raised if the US government decides to forego raising the debt ceiling and instead defaults on the assets that underpin that system.
The quest for macro “relaxation”
Hayes believes it’s all a matter of timing. His plan is to switch to cash in US dollars where the transition to certain risky assets is possible. It looks like Bitcoin is at the top of the menu. “I will be purchasing in the coming days,” the blog post said. I wish my investment amount really mattered, but it isn’t. So don’t think that my purchase will have an impact on BTC,” he said.
However, in the concluding part of his blog post, he explains that altcoins represent a huge opportunity going forward and these are likewise tied to timing. Hayes states that “the key to shitcoins is to understand the moment they rise and fall in waves.” She also makes the following statements about market cycles:
First, reserve assets in crypto rally – namely Bitcoin and Ethereum. The rally in these major coins eventually stops and then prices drop slightly. At the same time, shitcoins stage an aggressive rally. Then shitcoins rediscover gravity and interest returns to Bitcoin and Ether. This process continues until the bull market ends.
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