Co-founder and former CEO of BitMEX cryptocurrency trade, Arthur Hayes, lately took to X to clarify why he feels the highly-anticipated rate of interest cuts by the US Federal Reserve may not have the anticipated influence on Bitcoin’s worth.
Curiosity Charge Cuts Not The Silver Bullet For Increased BTC Value
Hayes acknowledged on X that regardless of the Federal Reserve Chair Jerome Powell just about confirming the incoming rate of interest cuts from September 2024 onwards, Bitcoin worth may not behave the best way many within the crypto market anticipate it to.
Since Powell’s Jackson Gap speech on August 23, 2024, Hayes notes that Bitcoin worth has been on a gentle downward trajectory, tumbling from roughly $64,000 to $58,881 by Sep 3, 2024.
In response to the previous BitMEX CEO, the incoming rate of interest cuts have made reverse repurchase agreements (RRPs) a comparatively extra enticing funding prospect than treasury payments which attracted vital capital throughout rate of interest hikes starting in March 2022.
For the uninitiated, RRPs are just like short-term loans utilized in cash markets, the place one celebration – sometimes a central financial institution or a monetary establishment – sells securities to a different celebration with an settlement to repurchase the identical securities at a later date for a better worth. The distinction between the sale worth and the repurchase worth is the curiosity earned by the purchaser of the securities.
At the moment, RRPs are paying a good 5.3% curiosity, making them a horny and secure avenue for establishments trying to briefly park their capital. As compared, 1-year treasury payments are paying 4.38% curiosity.
Hayes provides that the delta in rates of interest between RRPs and treasury payments is forcing giant banks and cash market funds to maneuver their capital from treasury payments to RRPs, leaving much less liquidity out there that could possibly be used to purchase extra risk-on property comparable to BTC.
Notably, RRPs have obtained an injection of an extra $120 billion for the reason that announcement of the possible rate of interest cuts from September 2024. Hayes expects this development to proceed so long as treasury invoice charges are decrease than RRP charges.
May Bitcoin Halving Play A Key Position In Resuming Bull Market?
Hayes’ rationalization runs counter to the extensively shared assumption that rate of interest cuts assist enhance the value of risk-on property comparable to shares and digital property. Nonetheless, it must be recalled that this yr additionally noticed the primary Bitcoin halving since 2020.
Traditionally, Bitcoin has gone on to respect in worth throughout its halving years, together with in 2020 when the COVID pandemic decimated costs of all risk-on property early within the yr. A number of seasoned analysts anticipate Bitcoin to duplicate its post-halving worth motion, igniting a brand new bullish momentum that might propel the main digital asset to new all-time-high costs.
The end result of rate of interest cuts, Bitcoin halving, together with elevated institutional curiosity in Bitcoin exchange-traded-funds (ETFs) in 2024 holds the potential to make for an thrilling remainder of the yr within the crypto business.
Featured Picture from Unsplash.com, Chart from TradingView.com