Bitcoin (BTC) has experienced an impressive rise over the past six months and its price currently stands at $25,712. While many people speculate about the reasons behind this steady rise, BitMEX co-founder and former CEO Arthur Hayes has a unique perspective. In his keynote speech at Korea Blockchain Week, Hayes argued that the catalyst for Bitcoin’s upward journey can be attributed to a series of events that occurred in March, specifically the Fed’s response to turmoil in the banking system. Here are the details…
Bitcoin forecaster attended the conference
In his keynote speech at Korea Blockchain Week on September 5, Hayes argued that Bitcoin’s bull run began on March 10, the day Silicon Valley Bank (SVB) was taken over by the Federal Deposit Insurance Corporation. In March, Silvergate Bank went into liquidation, followed by the forced closure of Signature Bank on 12 March due to regulatory pressures. These events shook the financial sector, leading the FED to establish the Bank Term Funding Program (BTFP). Within the scope of this program, banks were offered loans with a maturity of up to one year in return for providing “qualified assets” as collateral.
Essentially, the Fed acted as a pillar to stabilize the banking system by accepting distressed bonds in exchange for fresh dollars. Since then, Bitcoin’s price has increased by approximately 26%, and Hayes believes this is the true beginning of the current bull market. “We’ve basically abandoned this whole front where we care about the value of the dollar and the value of any fiat currency,” Hayes said. This shift in perception has led investors to explore fixed-supply assets such as Bitcoin.
Crypto sector is in a good position
Hayes claimed that this situation pushed investors to consider fixed supply assets such as Bitcoin. However, the rest of the market has yet to respond. However, he gave a timeline of six to 12 months for the bull market to be noticed. Even if the Fed and other central banks continue to raise interest rates or “print more money” to provide economic tightening, Hayes said Bitcoin will still perform well.
Interestingly, while Bitcoin is making significant gains, Hayes predicts that it will take some time for the broader market to fully respond to these economic changes. He offered a timeline of six to twelve months for the rest of the market to catch up. Hayes expressed confidence in Bitcoin’s resilience even if the Fed and other central banks continue to raise interest rates or “print more money,” saying, “In either scenario, whether the Fed increases or decreases, we are in a good position as a cryptocurrency industry.” .
AI, IPOs and token unlocks are critical
In a parallel analysis of the current economic landscape, Hayes also noted that traditional economic models are facing disruption. The FED’s aggressive interest rate increases to combat inflation led to unexpected results. Rising financial asset prices can increase capital gains taxes and government revenues. Yet when the Fed raises interest rates, those prices could stagnate, reducing tax revenues and leading to increased deficits. This, combined with political austerity measures, results in the US Treasury issuing more bonds. Hayes argues that this cycle paradoxically fuels economic growth, as interest payments to the wealthy stimulate spending and nominal GDP growth.
While Hayes continues to advocate for cryptocurrencies, he believes the cryptocurrency industry, including AI-focused companies, is well positioned to thrive amid these changing economic landscapes. With significant cash reserves and solid revenue streams, AI companies are less dependent on traditional banks for loans or credit, making them attractive investments. However, Hayes also warned of potential risks in the AI sector, such as overvaluation, long timelines for IPOs, and token lock-up periods. He said the combination of three crazes (artificial intelligence, crypto, and money printing) could lead to a significant asset bubble.
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