Arthur Hayes, co-founder and former CEO of cryptocurrency exchange BitMEX, took to X to provide a detailed analysis of the US economic landscape and its potential impacts on the cryptocurrency market. With a reputation for insightful commentary and a deep understanding of both traditional and digital finance, Hayes' insights are closely watched by industry participants.
Why will the Crypto Bull Run return on Monday?
in mailHayes pointed to a significant increase in the Treasury General Account (TGA), which he attributed to an influx of nearly $200 billion in tax revenues. “As expected, tax revenues added nearly $200 billion to the TGA,” Hayes said, setting the stage for a broader discussion about the potential impacts on financial markets.
Hayes then turned the focus to upcoming decisions to be made by US Treasury Secretary Janet Yellen regarding the management of the TGA. In a tone that combines respect and rigor, he outlines several possible scenarios, each of which has profound implications for market liquidity. “Forget about the Fed meeting in May. The Q2 2024 refund announcement will be made next week. “What games will (Janet) Yellen play, here are some options.”
First, he suggested that by “stopping Treasury issuance by lowering the TGA to zero,” Yellen could unleash a trillion-dollar liquidity injection into the economy. This strategy would involve using the funds accumulated in the TGA for federal spending without issuing new debt, thus directly boosting the money supply.
Second, Hayes expects “more borrowing to be shifted to Treasury bills, which removes money from the restructuring standby,” increasing liquidity by $400 billion. This maneuver may involve the Treasury selecting shorter-term debt instruments, which typically carry lower interest rates but increase the turnover in government securities. This is likely to pull funds away from the overnight reverse repo market, where financial institutions hold their excess funds temporarily.
Combining these two approaches, according to Hayes, could lead to a “$1.4 trillion liquidity injection” if Yellen decides to halt long-term bond issuance and increase bill issuance as the TGA and RRP accounts are exhausted. “The Fed doesn't matter, Yellen is a bad bitch, and you better respect her,” Hayes pointed out flatly. This statement underscores his belief in the significant impact of Treasury actions on Federal Reserve policies in the current economic situation.
Hayes predicted that these measures would lead to a bullish response in the stock market and, more importantly, a rapid acceleration in the cryptocurrency market. “If any of these three happen, expect a rise in prices and, more importantly, a re-acceleration of the crypto bull market,” he explained.
The implications of such financial strategies are significant. Increased liquidity typically reduces the attractiveness of low-yielding investments such as bonds and encourages the pursuit of higher returns in riskier assets, including stocks and cryptocurrencies. Furthermore, a shift in market sentiment towards “risk on” could see significant capital inflows into the cryptocurrency space, which is seen as a high-growth, albeit volatile, investment frontier.
In conclusion, Hayes' analysis suggests that next week – with the refund announcement coming on Monday, April 29 – could be crucial for market watchers. His perspective, drawn from his deep financial experience, points to a potential pivotal shift in US financial policy that could ripple through global markets. For cryptocurrency investors, these developments could signal important moves, underscoring the need for vigilance and readiness to respond to new economic signals.
At press time, Bitcoin was trading at $64,483.
Featured image from Shutterstock, chart from TradingView.com
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