Crypto billionaire and former CEO of BitMex Arthur Hayes has warned that Bitcoin may lose all of its recent gains if the Federal Reserve does not pivot away from its current monthly rate-hiking monetary policy.
In a January 19 blog post, Hayes talked about inflation and how it could impact the crypto market. The billionaire noted that the CPI figure has continued its downward movement after peaking around 9% in mid-2022, hurtling down towards the 2% target.
Investors expect the Fed to slow down rate hikes amid declining inflation, particularly to avoid a recession, Hayes said. “Those prognosticators would argue that our esteemed Lord Powell is looking for every opportunity to pivot away from his current Quantitative Tightening (QT) policies,” he added.
Hayes then argued that one reason behind the recent rally in the crypto market could be the “resumption of Fed USD money printing.” If this is the case, Bitcoin would continue its strong performance as the Fed slows down on rate hikes as expected.
On the other hand, Bitcoin and the broader crypto market could see all their recent gains erased if the central bank resumes with the current Quantitative Tightening (QT) policies. Hayes said:
“If the Fed does not follow through with a pivot, or multiple Fed governors talk down any expectation of a pivot even after “good” CPI prints, Bitcoin will likely crash back down towards previous lows.”
The former BitMex boss said he believes the Fed will “move to print money and avert another financial collapse.” And if this happens, it would mark the local bottom for risk assets such as Bitcoin.
It is worth noting that Fed Chair Jerome Powell has insisted that rates would remain elevated until inflation reaches that goal, suggesting that a pivot is not likely simply because CPI is trending lower.
As reported, the annual inflation rate fell to 6.5% in December, compared to 7.1% in November. Month-over-month, inflation cooled by 0.1%, compared to the 0.1% increase last month. Core CPI, which does not take volatile food and energy prices into account, fell to 5.7% from 6% in November.
Major cryptocurrencies have registered significant gains over the past weeks. Bitcoin surged to over $23,000 on Saturday, a level not seen in more than five months. Ethereum, the second-largest cryptocurrency, also registered significant gains, also reached a local high of around $1,674 on the day. Both coins are up by more than 30% over the past month.
Back in October last year, Hayes said the next crypto bull run will kick off when China eases its stance toward the crypto market. He argued that there are signs that it is already happening, one of which is the announcement by the Hong Kong government, which is “the proxy through which China interacts with the world,” regarding a bill to regulate crypto.