The Bottom Has Come for Crypto, Signals Arthur Hayes

The former BitMEX CEO has published a new blog post in which he predicts that the downside risks of crypto have now been mostly absorbed.

 

Arthur Hayes, the former CEO of BitMEX, a cryptocurrency exchange, has recently mostly been in the news because of his legal trouble. The crypto millionaire barely avoided prison time over accusations of money laundering during his tenure as CEO at BitMEX.

 

Most market participants, however, are familiar with Hayes because of his personal blog, where he regularly publishes analyses of and predictions about the state of the crypto market.

 

His latest piece called “Shut It Down!” once again casts a light on the effects of US monetary policy on the crypto markets. Hayes looks at tightening monetary policy and the effects of the war in Ukraine on assets and comes to the conclusion that the bottom, for now, is largely in.

 

He writes:

“The point is to be generally correct, and with a bit of fudging around the edges we can approximate a range that corresponds to what we believe is the local bottom. For Bitcoin, that’s $25,000 to $27,000. For Ether, that’s $1,700 to $1,800.”

 

Interestingly though, Hayes predicts Bitcoin and gold to eventually reach valuations of $1 million and $10,000 to $20,000, respectively. He argues that the Federal Reserve will eventually (have to) start buying government debt again — leading to another surge in inflation and mooning prices for “hard assets” like BTC and gold.

 

Hayes also looks at the fallout of the LUNA/UST crash. His analysis of events is that VC investors holding LUNA bags were able to divest their holdings into UST while the peg was still intact. They then swapped their UST over the counter for other stablecoins. However, the rising supply of UST contributed to the death spiral after distrust crept in and the peg started breaking.

 

Combine these two events — a risk-off macro environment and the default of LUNA — and most VC funds are not looking to accumulate more risky assets for the moment.

 

Coupled with the fact that BTC and ETH traded to the top of their previous cycles and their declining correlation with stocks, Hayes believes that price action will be volatile in the short term.

 

He concludes:

“This is why the politics and macroeconomic picture must coalesce before the crypto market can march meaningfully higher.”

 

Accumulate for the long term, but it’s best to sit on your trading hands for the next few months.