Arthur Hayes anticipates a looming bullish trend for Bitcoin as G7 central banks begin to loosen monetary policies

Arthur Hayes, co-founder of BitMEX, believes that recent policy shifts by global central banks are indicating the beginning of a significant bull market for Bitcoin and high-potential altcoins.

In his latest blog post, titled “Group of Fools,” Hayes explained how these changes in monetary policy are creating a fertile ground for the growth of the crypto market.

Hayes emphasized the recent rate cuts by the Bank of Canada (BOC) and the European Central Bank (ECB) as crucial moments. These decisions mark the first time in years that G7 countries have lowered their benchmark interest rates.

According to Hayes, this shift will bring new momentum to the crypto market. He stated:

“The trend is clear. Central banks are starting to ease their monetary policies. This is the opportune moment to heavily invest in Bitcoin and altcoins.”

Central bank easing

Central to Hayes’ analysis is the handling of the Japanese yen by the G7, which he believes is off track.

Hayes previously proposed that the US Federal Reserve (Fed) should exchange unlimited amounts of newly printed dollars with the Bank of Japan (BOJ) for yen. This move, he suggested, would provide the Japanese Ministry of Finance with unlimited dollar resources to purchase yen in global forex markets, thereby strengthening the yen.

However, he observed that the current strategy of the G7 seems to focus on convincing markets that the interest rate differential will decrease over time, leading to buying yen and selling other currencies.

The crux of Hayes’ argument lies in the discrepancy between the BOJ’s policy rate of 0.1% and the 4% to 5% rates of other G7 central banks. He argues that this difference fundamentally influences exchange rates.

He further explained that during the pandemic, central banks worldwide provided cheap money to counter economic slowdowns, but rising inflation compelled all G7 central banks except the BOJ to aggressively raise rates. The BOJ’s inability to raise rates is due to its extensive holdings of Japanese Government Bonds (JGBs). Raising rates would lead to JGB prices plummeting, resulting in significant losses for the central bank.

Hayes pointed out that cutting rates to reduce the interest rate differential is the G7’s only feasible option, despite most of these central banks still facing inflation levels above their target of 2%.

Hayes remarked that the recent rate cuts by the BOC and the ECB are unusual, given that inflation in both regions is still above their 2% targets. He speculated that these cuts may be a coordinated effort to manage the yen’s value and prevent potential devaluation of the Chinese yuan, which could destabilize the global financial system.

Looking forward, Hayes expressed skepticism about whether the Fed would cut rates so close to the upcoming US presidential election, despite market speculation. He predicted that the Fed and BOJ are likely to maintain their current policies in their upcoming meetings, with a potential surprise rate cut from the Bank of England (BOE) following the G7 summit.

Hayes concluded that the recent rate cuts signal the beginning of an easing cycle, which he believes will revitalize the crypto market.

New highs

Hayes sees these conditions as a catalyst for the crypto market. He mentioned that he is switching his investments from stablecoins back into “high-conviction shitcoins,” though he plans to disclose specific tokens only after securing his positions.

He also encouraged projects within his Maelstrom portfolio to proceed with token launches promptly.

Reflecting on historical trends, Hayes noted that both traditional equities and Bitcoin have historically surged during periods of low interest rates.

He highlighted Bitcoin’s significant surge from under $4,000 to $64,000 between March 2020 and April 2021, following the Fed’s substantial rate cut to 0.25%.

Mentioned in this article: Latest Alpha Market Report

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