Yesterday, New York Community Bank’s announcement of a staggering $252 million loss caused its stock price to plummet nearly 40%, reigniting concerns of a banking crisis replay. BitMEX co-founder Arthur Hayes predicts that the financial crisis at the bank could prompt the government to introduce new financial relief measures, potentially driving Bitcoin to mirror its trends from last March.
In early March last year, a series of banks including Silvergate, Silicon Valley Bank, and the second-largest crypto-friendly bank Signature Bank experienced crises, underscoring the fragility of centralized financial systems. New York Community Bank, which took over Signature Bank’s operations during that period, saw its stock price plummet by nearly 40% yesterday after disclosing a $252 million loss for Q4 of last year, shocking the market and raising concerns about the possibility of another banking crisis.
During last year’s banking crisis, Bitcoin prices surged in March, climbing 23% from $19,549 to break past $29,000. This surge was not only driven by Bitcoin’s decentralized nature contrasting with the highlighted vulnerabilities of traditional banks, but also by swift government rescue actions in the United States. At that time, the Treasury Department provided up to $250 billion to support banks through the Banking Temporary Facility Program (BTFP), boosting investor confidence.
Arthur Hayes believes that the recent crisis at New York Community Bank has caught attention. He anticipates that the Federal Reserve and the Treasury Department will quickly roll out financial aid measures, potentially causing Bitcoin prices to replicate last March’s trends. His forecast is based on several factors:
- New York Community Bank’s unexpected loss announcement, largely due to a tenfold increase in loan loss provisions, indicating ongoing issues in the banking system.
- Significant declines in yields on 10-year and 2-year US Treasury bonds, suggesting market expectations of new relief measures to address the problems.
- The ineffectiveness of existing short-term lending mechanisms provided by the Federal Reserve to banks (including BTFP and the Discount Window). Hayes notes that this is because commercial real estate (CRE) and multi-family residential mortgages are not accepted as suitable collateral.
- Finally, Hayes recently predicted Bitcoin prices would fall below $40,000 and accordingly purchased put options with a strike price of $35,000 expiring on March 29. While Bitcoin did drop below $40,000 temporarily, it did not reach Hayes’s predicted level of $35,000.
In response to a question from a netizen about whether he still expects Bitcoin to plummet to $30-35,000 before March, similar to his prediction of a minor financial crisis, then rise again, Hayes confirmed his strategy.