Arthur Hayes, co-founder of BitMEX and macro-market analyst, has decided to deploy his dry powder into Bitcoin earlier than he had originally planned. Hayes had previously warned of a possible retracement in the crypto market, but believes there is still an opportunity to profit from the ongoing risk asset rally that began last month. This rally was caused by signs of disinflation in December, which signaled to markets that the Federal Reserve’s mission to combat inflation may soon be ending.
Hayes believes that the rally is not yet over for two reasons. Firstly, the Treasury General Account (TGA) is likely to spend another $500 billion into the economy soon due to the country’s fast-approaching debt limit. Secondly, Federal Reserve Chairman Jerome Powell’s speech after FOMC last week has the market feeling bullish again.
Hayes also believes that central banks across the world are returning to “business as usual” – printing money into their economy and driving up costs. He cited the Bank of Japan in particular for being “absolutely determined to ensure hyperinflation” takes place in the country.
However, Hayes warned that markets may be in trouble by mid-year, once the TGA is exhausted of funds. At this point, he predicts a “political circus” after which congress ultimately raises the debt ceiling, inciting the US Treasury to issue bonds to fund the Federal Deficit. Combined with the Federal Reserve’s ongoing plans to dump $100 billion of US Treasuries onto the market, each event will drain significant liquidity from the market. As such, Hayes advises investors to be ready to pound the sell button as soon as the TGA has been completely drawn down to zero, but before the debt ceiling is raised.