The former head of BitMEX admits the positive impact of the Fed's policy on bitcoin

Arthur Hayes believes that the reduction in assets and liabilities on the regulator's balance sheet could simultaneously stimulate a rally in the stock market

01.09.2022 - 14:05

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2 min

What’s new? Former head of cryptocurrency exchange BitMEX Arthur Hayes said that the US Federal Reserve System (Fed) could have a positive impact on the bitcoin exchange rate. He described a scenario in which the Fed reduces the assets and liabilities on its balance sheet while stimulating a rally in the stock market.

1/Let's play a little game called "Hide Those Treasuries".The Rules:The Fed is reducing it's balance sheet, $ liq -veThe US Treasury is issuing bonds to pay for large and increasing fiscal spending, $ liq -veBut we want stonks to pump, what to do? https://t.co/l0sKQBgQhs— Arthur Hayes (@CryptoHayes) August 30, 2022

What else does Hayes say? He thinks it's unlikely that foreign investors or the Fed itself would buy US Treasury bonds. Hayes suggests that banks could buy Treasury securities and then profit from the leverage, causing stocks to rise.

3/What if the US banks can buy Treasuries, and then flip them to the Fed in exchange for $'s?Then the banks take those $'s and leverage them through the financial markets net result more $ liq, stonks pump! Yay— Arthur Hayes (@CryptoHayes) August 30, 2022

Hayes says that in September the New York Fed will conduct a “test run” of a $500 billion standing repo facility (SRF). Instead of worrying about interest rates, he says, people need to monitor how well quantitative tightening actually takes liquidity off the Fed's balance sheet. Hayes believes that the success of the regulator's policies will determine whether bitcoin will rise or continue to fall.

As of September 1, 12:25 UTC, the asset is trading at $19 961, having lost 1,33% in 24 hours, according to Binance.

In early August, Hayes predicted that ETH would reach $5000 by the end of the first quarter of 2023. His theory is based on two factors: a loosening of the Fed's monetary policy and the network's successful transition to the Proof of Stake (PoS) consensus algorithm. According to him, the combination of these conditions will boost the price of the second-largest cryptocurrency.

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