Former Bitmex CEO Arthur Hayes Warns of Potential 30% Bitcoin Market Correction

Arthur Hayes' Bitcoin Price Forecast

Former Bitmex CEO Arthur Hayes recently shared his predictions for the bitcoin market in a Medium post. In his forecast, he also discussed the potential impact of spot bitcoin exchange-traded funds (ETFs) on the price of bitcoin. The U.S. Securities and Exchange Commission (SEC) is expected to approve several spot bitcoin ETFs in the coming week.

Hayes believes that three key factors will converge in March, resulting in a correction in the bitcoin market. He anticipates a healthy 20% to 30% correction from the current bitcoin price by early March. However, he warns that the correction could be even more severe if the U.S.-listed spot bitcoin ETFs have already started trading.

Factors Influencing the Correction

The first factor that Hayes highlights is the Fed's Reverse Repurchase Operations (RRPs) or reverse repo. He expects the RRP balance to reach $200 billion by early March. He suggests that the market will become uncertain about what comes next and emphasizes the need for another source of dollar liquidity to sustain the market momentum.

The second factor revolves around the banks' need to find cash to swap with U.S. Treasuries and other eligible bonds repo'd with the Fed on March 12. This requirement puts additional pressure on the financial system.

Lastly, Hayes considers the possibility of the Federal Reserve cutting interest rates at the upcoming Federal Open Market Committee (FOMC) meeting on March 20. He notes that the market anticipates the Fed to initiate its first rate cut of at least 0.25% since March 2021.

Potential Impact of Spot Bitcoin ETFs

Hayes also discusses the potential impact of spot bitcoin ETFs on the market. He imagines a scenario where the anticipation of significant fiat inflows into these ETFs drives the price of bitcoin above $60,000, nearing its all-time high of $70,000. However, he cautions that this could lead to a 30% to 40% correction due to a sudden shortage of dollar liquidity.

The SEC has received proposals for listing and trading 11 spot bitcoin ETFs, with trading potentially starting as early as January 11.

Hayes' Crypto Portfolio and Conclusion

Arthur Hayes reveals that his crypto portfolio consists mainly of bitcoin and ether, which make up around 70% of his holdings. He explains that due to the poor liquidity of other cryptocurrencies and their derivatives, he relies on bitcoin derivatives to hedge his exposure to the crypto market.

In conclusion, Hayes expects the market to begin correcting significantly around March 12th. It remains to be seen how these factors will unfold and impact the bitcoin market.

What are your thoughts on Arthur Hayes' predictions? Share your opinions in the comments section below.

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By: Kevin Helms
Title: Former Bitmex CEO Arthur Hayes Warns of Potential 30% Bitcoin Market Correction
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Published Date: Mon, 08 Jan 2024 02:30:37 +0000

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