Bitcoin Might Not Benefit From Federal Reserve Rate Cuts, Former BitMEX CEO Explains Why

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Co-founder and former CEO of BitMEX cryptocurrency trade, Arthur Hayes, not too long ago took to X to clarify why he feels the highly-anticipated rate of interest cuts by the US Federal Reserve may not have the anticipated affect on Bitcoin’s worth.

Curiosity Fee Cuts Not The Silver Bullet For Larger BTC Worth

Hayes said on X that regardless of the Federal Reserve Chair Jerome Powell just about confirming the incoming rate of interest cuts from September 2024 onwards, Bitcoin worth may not behave the way in which many within the crypto market count on it to.

Since Powell’s Jackson Gap speech on August 23, 2024, Hayes notes that Bitcoin worth has been on a gentle downward trajectory, tumbling from roughly $64,000 to $58,881 by Sep 3, 2024.

In response to the previous BitMEX CEO, the incoming rate of interest cuts have made reverse repurchase agreements (RRPs) a comparatively extra engaging funding prospect than treasury payments which attracted vital capital throughout rate of interest hikes starting in March 2022.

For the uninitiated, RRPs are just like short-term loans utilized in cash markets, the place one social gathering – sometimes a central financial institution or a monetary establishment – sells securities to a different social gathering with an settlement to repurchase the identical securities at a later date for the next worth. The distinction between the sale worth and the repurchase worth is the curiosity earned by the purchaser of the securities.

At present, RRPs are paying a good 5.3% curiosity, making them a gorgeous and secure avenue for establishments seeking to briefly park their capital. As compared, 1-year treasury payments are paying 4.38% curiosity.

Hayes provides that the delta in rates of interest between RRPs and treasury payments is forcing massive banks and cash market funds to maneuver their capital from treasury payments to RRPs, leaving much less liquidity out there that might be used to purchase extra risk-on property comparable to BTC.

Notably, RRPs have obtained an injection of an extra $120 billion because the announcement of the possible rate of interest cuts from September 2024. Hayes expects this pattern to proceed so long as treasury invoice charges are decrease than RRP charges.

May Bitcoin Halving Play A Key Position In Resuming Bull Market?

Hayes’ rationalization runs counter to the extensively shared assumption that rate of interest cuts assist enhance the value of risk-on property comparable to shares and digital property. Nevertheless, it needs to be recalled that this yr additionally noticed the primary Bitcoin halving since 2020.

Traditionally, Bitcoin has gone on to recognize in worth throughout its halving years, together with in 2020 when the COVID pandemic decimated costs of all risk-on property early within the yr. A number of seasoned analysts count on Bitcoin to duplicate its post-halving worth motion, igniting a brand new bullish momentum that might propel the main digital asset to new all-time-high costs.

The end result of rate of interest cuts, Bitcoin halving, together with elevated institutional curiosity in Bitcoin exchange-traded-funds (ETFs) in 2024 holds the potential to make for an thrilling remainder of the yr within the crypto business.