As the Bitcoin halving approaches, BitMEX co-founder Arthur Hayes predicts in his latest article that the current tight liquidity of the US dollar will put pressure on the Bitcoin and overall crypto market, leading to a decline in prices before and after the halving.
Facing the upcoming halving of Bitcoin, Arthur Hayes, co-founder of BitMEX, published a new article stating that this significant event is happening during a period of relatively tight US dollar liquidity. He expects this to add fuel to the “great sell-off of crypto assets” and create pressure on the crypto market in the coming weeks.
Arthur Hayes points out that the scheduled Bitcoin block reward halving, which is expected to occur on April 20th, is generally considered a major bullish factor for the crypto market. While he acknowledges that this event will drive prices up in the mid-term, he also warns market participants that the price trend before and after the halving may be negative.
This led Arthur Hayes to decide not to make any trades until May. He states that even if it means potentially missing out on a few percentage points of profit, ensuring to avoid losses is a worthwhile decision for him.
Expectation of improved liquidity starting in May to stimulate the market
However, Arthur Hayes also welcomes the market to prove him wrong and believes that liquidity will improve starting in May. He highlights several reasons for this:
1. Slowing down the pace of quantitative tightening (QT): Arthur Hayes anticipates that at the beginning of May, the Fed will announce a slowdown in the pace of quantitative tightening. QT refers to the process of the Fed reducing the size of its balance sheet, which typically reduces US dollar liquidity in the market. Slowing down QT, specifically reducing the amount of bonds no longer being reinvested each month, will slow down the absorption of US dollar liquidity, thus providing more liquidity to the market.
2. Utilizing the Treasury General Account (TGA): Arthur Hayes mentions that the US Treasury might start using funds from its Treasury General Account (TGA) in May. He expects the scale of funds to reach up to $1 trillion, which will be used to increase market liquidity. The TGA is the account of the US government within the Federal Reserve System, used for daily operational expenses. After an increase in tax revenue, the balance of the TGA is expected to rise, and these funds will be released back into the market through government spending (such as tax cuts or increased government expenditure), thereby increasing liquidity.
3. End of the US tax season: Mid-April is the deadline for tax payments in the US, during which individuals and businesses need to pay taxes, which typically drains liquidity from the market. Arthur Hayes believes that once the tax season is over, the pressure of drained liquidity from the market will ease.
4. US election year policies: Arthur Hayes emphasizes that due to being an election year in the US, the government is expected to try to stimulate the economy by increasing market liquidity to improve voters’ sentiment, thereby supporting the incumbent government’s chances of re-election.
Taking all these factors into account, Arthur Hayes believes that although April may face liquidity pressure, starting in May, market liquidity will improve due to policy support and changes in seasonal factors. This may have a positive impact on risk assets markets, including cryptocurrencies and the stock market. However, we will soon find out how the trend of BTC will unfold before and after the halving.