Cryptocurrency Capitalist Arthur Hayes Says Fed Can Trigger Bitcoin (BTC) Rallies Despite hawkish stance – Here's How
The former CEO of a cryptocurrency exchange is weighing in on the state of the economy after the Federal Reserve recently announced that it has no plans to cut interest rates anytime soon.
In a series of tweets, BitMEX co-founder Arthur Hayes theorized how the Fed could reduce assets and liabilities on its balance sheet while boosting the stock market.
“Let's play a little game called 'Hide those coffers'.
The Fed is reducing its balance sheet, dollar liquidity is negative.
The US Treasury Department is issuing bonds to pay for large and growing fiscal expenditures, the liquidity of the dollar is negative.
But we want the pump stonks, what to do? "
Hayes says it's unlikely foreign investors or the Fed itself will buy U.S. Treasuries, which he believes will be used to send another stimulus test ahead of the election. upcoming midterm. He suggested that banks could buy Treasuries and then profit from leverage, which would drive stocks up.
“What if US banks could buy Treasuries and then turn them over to the Fed in exchange for dollars?
Then the banks take those dollars and leverage them through the financial markets. Net results, more liquidity in dollars, pump stonks! Right. The crypto veteran added that while banks and the Fed may both be reluctant to buy bonds directly due to balance sheet liabilities, they can use the Fed's permanent repo facility (SRF), which allows the Fed to buy and sell securities overnight, to achieve a common goal.
“Every night the Fed accepts Treasuries from the banks and sends them new dollars.
Banks are not affected by the cost of capital and get very cheap dollar liquidity, which can be leveraged in the financial economy… [then] pump stonks. ”
Hayes said the New York Fed would do a “test run” involving SRF in September with $500 billion in processing capacity, then added, “The Fed will be enable it? I do not know. But we should keep an eye on it, hence I added it to my US dollar liquidity index.
The SRF is a great way to solicit Treasury issuance that is required for pre-election stimulus. "
The crypto entrepreneur ended his tweet storm by suggesting that instead of worrying about interest rates, people need to keep an eye on how much quantitative tightening is actually pulling liquidity off the Fed's balance sheet.
Hayes thinks the Fed's success will determine if Bitcoin (BTC) will recover or continue to fall.
“The amount of dollar liquidity increased, the BTC boom and pump.
The amount of dollar liquidity drops, crashes and BTC dumping.
You can also throw away all those useless economics textbooks that talk about income and other nonsense.”
At the time of writing, Bitcoin is up 1.57% on the day and is worth $20,145.
Sep 01, 2022