Bitcoin (BTC), ether (ETH), and even emerging altcoins are a solid “buy,” says one previously risk-averse investor.
In a blog post published on Feb. 8, industry insider Arthur Hayes announced an about-face in his current crypto investment plans.
Hayes changes his mindset on ‘risky assets’
The current macroeconomic conditions emanating from the United States Federal Reserve have previously led Arthur Hayes to avoid what he calls “risky assets.”
As inflation slows and Fed rates rise with them, several new storms are brewing in the US, and the Fed and Congress and the Treasury Department will all steer the economy as they see fit, he says.
The problem is guessing how these events will unfold throughout the year. For Hayes, 2023 could well be split in half, with H1 being an ideal investment environment for crypto.
This contradicts an earlier thesis from mid-January, in which the former BitMEX CEO said he is staying on the sidelines amid fears of a Fed-induced capitulation event hitting risky assets.
“My concern over this possible outcome, which would most likely occur later in 2023, has prompted me to keep my excess capital in money market funds and short-dated US Treasury bills,” he said.
“As such, the portion of my liquid capital that I ultimately plan to use to buy crypto is missing out on the current monster rally we are witnessing from local lows. Bitcoin has rallied nearly 50% from the $16,000 lows we saw around the FTX fallout.”
Hayes went on to say that despite 40% gains in January alone, Bitcoin is probably far from done with its recovery, comparing the environment for risky assets to that of 2009 and the start of quantitative easing (QE).
S&P 500 (SPX) annotated chart (screenshot). Credit: Arthur Hayes/Medium
This year the picture is complex – QE has given way to quantitative tightening (QT), which removes liquidity from the US financial system at the expense of risky assets.
However, H1 seems to bring some relief – until Congress votes in favor of a debt ceiling hike in the summer, which Hayes and others say is inevitable, some liquidity will actually return to avoid hitting the debt ceiling too soon.
$500 billion of cash in the Treasury General Account (TGA) will be emptied, canceling out the $100 billion in liquidity the Fed is removing monthly.
“The TGA will be exhausted sometime mid-year. Immediately after its exhaustion, there will be a political circus around raising the debt ceiling in the US,” the blog post predicts.
“Given that the western-led fiat financial system would collapse overnight if the US government decided to forego raising the debt ceiling and instead default on the assets that underpin that system, one can assume that the debt ceiling will be raised.” Trend chart (screenshot). Source: US Treasury Department
Look for the “unfold” macro
Then the tide turns and risky assets could again be a thorn in the side of every investor.
Related: The BTC price metric that has been showing the biggest bitcoin bull runs breaks out at $23,000
It’s all a matter of timing, Hayes believes. His plan is to invest in US dollar cash from where a transition into select risky assets is possible. At the top of the menu, it seems, is Bitcoin.
“I will set up in the coming days. I wish my size actually mattered, but it doesn’t – so please don’t think that if this happens it will have a discernible impact on the price of the orange coin,” he told readers.
However, altcoins represent a great opportunity for the future, the blog post concludes, although these are also dependent on timing.
“The key to shitcoining is understanding that they go up and down in waves. Crypto reserve assets – i.e. bitcoin and ether – recover first. The rally from these loyal followers eventually stalls and then prices drop slightly,” Hayes wrote of crypto market cycles.
“At the same time, the Shitcoin complex is staging an aggressive rally. Then shitcoins rediscover gravity and interest shifts back to bitcoin and ether. And this gradual process will continue until the secular bull ends.”
Year-to-date, the total crypto market cap is up around 34%, according to data from Cointelegraph Markets Pro and TradingView.
Total Crypto Market Cap 1-Day Candlestick Chart. Source: TradingView
So the process in 2023 will be guided by the “unwinding” of the short window of more accommodating economic conditions currently showing in the US
The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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