BitMEX founder Arthur Hayes projected a massive potential downside for Bitcoin BTC/USD in the upcoming months. He anticipated a significant correction of 20% to 30% by early March 2024.
Hayes' analysis, which is based on his assessment of various economic indicators and market trends, pointed to several key factors that could influence Bitcoin's trajectory.
He estimated the Reverse Repo Program (RRP) balance, which is the liquidity outlet for banks, could decline to $200 billion in early March. A declining Reverse Repo balance is seen as a warning sign of potential stress in short-term dollar funding markets.
Hayes was concerned that such a scenario arising in March could trigger risk-off behavior and sell-offs in volatile assets such as Bitcoin.
Furthermore, the expiration of the Bank Term Funding Program (BTFP) could lead to liquidity issues for banks, potentially further straining the financial markets.
Adding to that, the Federal Reserve's expected interest rate decision in March looms large, with rate cuts likely moving markets.
Hayes speculated the impact of U.S.-listed spot Bitcoin ETFs could drive substantial fiat investment into these ETFs, propelling Bitcoin's price above $60,000 in the process.
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He still warned of a possible severe correction, a "dollar liquidity rug pull," that could lead to a 30% to 40% drop in Bitcoin's value.
In response to these predictions, Hayes planned to adjust his trading strategy accordingly.
In the short run, he intended to short the crypto market using Bitcoin puts. Following the anticipated turbulent period in March, Hayes planned to resume selling U.S. Treasury bills and acquire more Bitcoin and other cryptocurrencies,
The BitMEX founder's analysis highlighted the short-term potential for significant market corrections influenced by broader economic policies and liquidity factors.
His insights offered valuable considerations for investors and traders in the cryptocurrency space, as they plan their strategies in a potentially volatile market.
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