Bitcoin billionaire Arthur Hayes believes risky assets like cryptocurrencies will have a tough time through May. This means that the market should expect a price drop rather than an increase around the BTC halving.
“The narrative that the halving will have a positive impact on crypto prices is firmly entrenched. When most market participants agree on a particular outcome, the opposite usually occurs,” the co-founder and former CEO of BitMEX wrote in his latest essay. “That’s why I believe Bitcoin and crypto prices in general will collapse around the halving.”
The Bitcoin halving is a regularly occurring event that reduces the rate at which new BTC flows into the market through miner rewards. This next halving – which will reduce the miner reward from 6.25 to 3,125 BTC – will be the fourth ever since Bitcoin's launch in 2009.
Usually, this regular reminder of Bitcoin's scarcity is the cause Price of BTC– and the rest of the crypto market – to recover. But this time, Hayes explains that US dollar liquidity could delay the post-halving pump expected by most traders.
He further explains that dollar liquidity has been impacted by US tax payments, the Federal Reserve's ongoing Quantitative Tightening (QT) program and the Treasury General Account (TGA) balance. Together, these macroeconomic forces have led to a tightening of US dollar liquidity in the market, which has impacted asset prices and trading strategies.
So instead of sparking a rally, Hayes thinks Bitcoin's next halving could instead “drive a rapid fire-sale of crypto assets.”
For this reason, he is staying away from the market until the situation eases in May. He explained that he had sold some Solana (SOL), Meme Coin Cat in a Dogs World (MEW) and NetMind Chain Utility Coin NetMind Token (NMT).
“The proceeds were deposited into Ethena’s USDe and staked to generate this whopping return,” he writes. “Before Ethereum, I would have held USDT or USDC and earned nothing, while Tether and Circle reaped all the T-Bill earnings.”
Ethena’s USDe is a “synthetic dollar protocol” that generates yield from a combination of ether Staking rewards and hedging derivative positions. But the high returns have drawn comparisons to Terra's stablecoin TerraUSD, which famously wiped out $11 billion in its 2022 crash.
According to the Ethena homepage, the USDe yield is 37.1% at the time of writing. But there's one thing Hayes wouldn't do in the fallow phase: short the market.
“From now until May 1, I will be in a no-trade zone,” he wrote. “I hope to return in May with dry powder to position myself for the bull market to begin in earnest.”
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