In a recent analysis, Arthur Hayes, the co-founder of BitMEX, is stirring the pot with predictions that the much-anticipated crypto bull market might be postponed until the end of September. Despite Bitcoin’s impressive rise from $25,800 to $56,400 over the past year, the crypto market is still grappling with a sense of cautious optimism rather than full-blown euphoria. This ongoing sentiment is reflected in the Fear & Greed Index, which remains stuck at 34, signaling persistent fear among investors, and the total crypto market cap has seen a significant drop of $400 billion since August.
The launch of spot Bitcoin ETFs earlier this year generated considerable hype, driving Bitcoin to an all-time high of nearly $74,000 in March and fueling hopes for a sustained bull market. However, those hopes have yet to materialize into a sustained rally, leaving many traders on edge.
Hayes attributes the delay in the bull market to broader economic factors, particularly the actions of the U.S. Federal Reserve and government spending policies. He notes that while the market eagerly anticipates a surge in crypto prices, it may take longer than expected due to these macroeconomic influences. Specifically, the short-term U.S. interest rate futures suggest a higher likelihood of a 50-basis-point rate cut in September, as opposed to a 25-basis-point cut.
Reflecting on historical trends, Hayes points out that the Fed’s decision to pause interest rate hikes in September 2023 led to a rise in U.S. Treasury bond yields. Higher yields can make it more expensive for the government to finance its deficit, which can, in turn, impact the broader economy. Hayes identifies the 10-year Treasury yield as a critical indicator to watch. If it hits 5% (currently at 3.7%), it could cause market disruptions, initially affecting stocks and cryptocurrencies negatively. However, this may eventually lead to a liquidity boost as the government responds with measures to lower Treasury yields, which would be beneficial for risk-on assets like Bitcoin.
The pause in rate hikes presents a mixed bag for the crypto market. On one hand, it signals the end of the tightening phase. On the other hand, rising bond yields could exert short-term pressure on riskier assets, including cryptocurrencies. Hayes predicts that Bitcoin might experience some volatility or even a short-term dip before the long-term bullish trend begins. He expects that by late September, the government may implement new liquidity measures, sparking the anticipated rally in the crypto market.
Adding to the complexity, historical data shows that September has been a challenging month for Bitcoin, with an average loss of 4.71%. Conversely, October often brings more favorable outcomes, with an average positive return of 22.9%. Moreover, recent reports challenge the traditional belief that Bitcoin’s four-year halving cycle is a key driver of price increases. Instead, current market dynamics are influenced more by macroeconomic factors and global liquidity conditions.
Despite the potential for more short-term turbulence, Hayes remains optimistic about a future bull run. His advice to traders? Stay patient and keep an eye out for signs of liquidity injections that could ignite the next major move in the crypto market.
