BitMEX founder Arthur Hayes recently shared his insights on the current state of the financial markets, focusing on Bitcoin’s potential support level and the actions of key figures like US Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell.
Bitcoin Support Projections
According to a recent blog post, Hayes believed that Bitcoin could find support between $30,000 and $35,000. To position himself for this scenario, he revealed that he had purchased $35,000 strike puts set to expire on March 29th, 2024. In preparation for the potential BTC dip, Hayes disclosed that he had sold his trading positions in Solana and Bonk at a slight loss, emphasizing his intent to start “bottom fishing” once Bitcoin drops below $35,000.
Discussing the actions of Yellen and Powell, Hayes characterized their approach as oscillating between decisive actions and vague talking points. Yellen’s decision to shift borrowing to Treasury bills (T-bills) was highlighted as a move that injected significant liquidity into the markets. On the other hand, Powell’s talk about potential rate cuts and tapering of Quantitative Tightening (QT) was seen as mere rhetoric without immediate monetary stimulus.
Hayes criticized the market’s interpretation of both Yellen and Powell’s actions and words as if they were equivalent, noting that while Yellen’s actions added liquidity, Powell’s talk did not result in increased monetary stimulus. Despite the S&P 500 and Nasdaq 100 hitting new all-time highs, Hayes cautioned that the real indicator of dollar liquidity, Bitcoin, was showing signs of concern, dropping from $48,000 to below $40,000.
He argued against two common explanations for Bitcoin’s recent dip – outflows from the Grayscale Bitcoin Trust (GBTC) and anticipation of the non-renewal of the Bank Term Funding Program (BTFP). Hayes contended that the second argument was more valid, suggesting that the cessation of the BTFP could lead to a mini-financial crisis, contrary to the confidence exhibited by Yellen and Powell.
Hayes concluded by providing charts to support his view that the Fed is trapped between inflation and a potential banking crisis, with Bitcoin acting as a key indicator. He emphasized the importance of watching Yellen’s upcoming actions, particularly in the Quarterly Refunding Announcement (QRA) on January 31st, to gauge the market’s direction.
However, Hayes painted a complex picture of the current financial landscape, expressing skepticism about the effectiveness of central bank communication and highlighting Bitcoin as a leading indicator for broader market movements.
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