Former BitMEX CEO Arthur Hayes thinks that the upcoming interest rate cut by the US Federal Reserve (Fed) may cause a short-term crypto market crash.
The Fed is making a Big Mistake, Hayes said
Delivering a presentation titled ‘Thoughts on Current Economic Events’, at the Token2049 event in Singapore on September 18, Hayes revealed that he is also gone. happy about the Fed’s decision to cut interest rates. Hayes says:
I think the Fed is making a big mistake in cutting rates at a time when the US government is printing and spending as much money as it has during peacetime. Although I think most people are looking forward to a rate cut, which means they think the stock market and other things will pump the jam, I think the markets will fall a few days after the Fed rates.
While delivering the presentation, the serial digital assets entrepreneur pointed to a chart showing that nearly 50% of the world’s central banks today are in a position to cut rates. Hayes suggested that the Fed may cut rates by 50 or 75 basis points (bps), which may narrow the interest rate differential between the US dollar (USD) and the Japanese yen (JPY) and culminate in a broader market decline. He commented:
We saw what happened a few weeks ago when the yen went from 162 to about 142, about 14 days of trading that caused almost a small collapse of the currency, “said the former executive of BitMEX, adding: “We will see another visit. of that financial stress.
Adding to the validity of his prediction, Hayes combined investing in digital currencies by holding 5%-yielding Treasury Bills (T-bills). He said investors prefer to put their money into government-backed debt during market turmoil rather than riskier decentralized finance (DeFi) applications. Hayes emphasized that the income from most crypto assets is ‘a little bit more or less than the rate of T-bills’.
However, Hayes wasn’t completely dismissing holding cryptocurrencies in a falling interest rate environment. He analyzed the returns generated by four cryptocurrencies, namely Ethereum (ETH), Athena (ENA), Pendle (PENDLE), and Ondo (ONDO). Hayes emphasized that he has significant assets in three cryptocurrencies other than ONDO.
Hayes Bullish on Ethereum Despite Weak Performance
Hayes said the current high interest rate environment has a negative impact on financial markets around the world, including crypto markets. Taking the example of Ethereum, Hayes said that its high yields of 3-4% are not attractive enough for investors to ignore T-bonds that yield 5.5% without risk.
Hayes even called Ethereum the ‘bond of the internet’, which is not too surprising since in 2024 ETH has been underperforming compared to other major cryptocurrencies such as Bitcoin (BTC), Solana (SOL), the -Binance Coin (BNB), and others. .
However, Hayes added that with the rapid fall in interest rates, Ethereum’s bull market opportunities will increase. However, the attractiveness of digital assets will depend heavily on the production of T-bills falling at an even faster pace. Hayes added that despite the storms facing Ethereum, he is still investing in it.
Hayes is not the only crypto-enthusiast skeptical of interest rate cuts. Another expert on the crypto market recently he asserted that the Fed’s decision to cut rates could lead to a market selloff and correction. Bitcoin is trading at $59,746 at press time, up 1.2% in the last 24 hours.
Featured image from Unsplash.com, Chart from TradingView.com