BitMEX Co-Founder Arthur Hayes has recently shared his insights on the future of Bitcoin, predicting a significant correction in the cryptocurrency’s price. In a detailed post, Hayes outlined his viewpoint and issued a warning to traders amidst the ongoing crypto bull market.
The Anticipated Correction
Hayes anticipates a potential decline ranging from 20% to 30% by early March. He even prepares for what he refers to as a “vicious washout” that could affect crypto investors who are relatively new to the market.
“If Bitcoin ETFs attract massive fiat inflows, pushing the price above $60,000 and close to its all-time high of $70,000, we may see a correction of 30% to 40%,” said Hayes.
March Variables Impacting the Market
Hayes highlighted three critical variables that may collide in March and potentially impact the crypto market.
- Reverse Repo Program (RRP) Balance Decline: Hayes emphasized the importance of monitoring the RRP balance, suggesting that if it approaches zero, the markets may experience a downturn. The decline in RRP balance is tied to liquidity injection and the need for alternative sources to sustain market momentum.
- Bank Term Funding Program (BTFP) Renewal: The decision on whether to renew the BTFP on March 12th becomes crucial, as it has implications for banks seeking cash to swap with U.S. Treasuries. Hayes predicts a potential non-renewal due to the upcoming election year.
- Federal Reserve Rate Cut: The Fed’s March meeting on the 20th may result in its first rate cut since 2021. Hayes analyzed the interdependence of these variables, suggesting that the sequence of events would influence the market’s assumption of future dollar liquidity from the Fed and the U.S. Treasury.
Hayes emphasized the interdependence of these variables and noted that their sequence matters in shaping the market’s perception. He urged traders to assign probabilities to different scenarios and anticipate the market’s reactions accordingly.
Tactical Trading Decisions
To hedge against the expected correction, Hayes outlined his strategic trading decisions, including the potential use of Bitcoin puts. He cautioned against taking additional risks during this period due to the uncertainty surrounding the identified decision points in March.
Despite the short-term concerns, the BitMEX co-founder remains optimistic in the long term. He expects that things will be back on schedule by late March.
