The price of bitcoin has been growing at a fast pace in the last 6 months. On Oct 2023, Bitcoin was priced at $27000 and at press time it is priced at $43600.
Arthur Hayes, the co-founder of prominent crypto exchange, BitMex and Chief investment officer of Maelstrom warned investors of a 20% to 30% drop in the price of Bitcoin.
In a blog post, Arthur said he is preparing for a vicious washout by March of 2024. He also stated “I loaded up on crypto in the second half of 2023”
Arthur also added, “I believe now until April is a no-trade zone in terms of the addition of risk.”
Here’s Why
The first reason is that throughout last year the Federal Reserve’s reverse repo program (RRP) has been drawn down. Banks and Investment firms may have parked cash and are earning intrest. Hayes believes that crypto will get the beating if there is no source of dollar liquidity, bonds, and stocks.
The Second reason, Bank Term Funding Program (BTFP) is set to expire on March 12, 2024, which might create strong turbulence in the banking system across the United States. BTFP helped delay last year’s banking crisis
The BTFP provided banks with funding to fulfill their withdrawals. The banks were lent at a notional value of their U.S. bond holding rather than selling at a loss if they had sold at the open market due to Fed’s aggressive rate hikes.
Hayes stated that BTFP might not be able to extend during this U.S. presidential election year. He also added that this could result in bankrupting some banks that sitting on massive unrealized losses on their bond holdings.
Price of Bitcoin. What’s next?
If Hayes’s predictions plays out Bitcoin could drop by around 20% to 30% from its early March prices.
He also added the price of Bitcoin could drop by around 40% to $60000 to $70000.
Hayes stated, “Bitcoin initially will decline sharply with the broader financial markets but will rebound before the Fed meeting.”
The rebound of bitcoin is because bitcoin is traded globally and not liable to the banking system.