Arthur Hayes, founder and former CEO of crypto exchange BitMex, has warned that Bitcoin (BTC) and the digital asset market could face a potential downturn if the Federal Reserve does not reverse its monetary policy.
In particular, Hayes noted that a scenario could arise if the current bitcoin rally is caused by the market pushing for a resumption of money printing by the Fed, he said in a blog post published Jan. 19.
“If the Fed doesn’t follow through on a pivot, or several Fed governors talk about all the expectations for a pivot even after a ‘good’ CPI, Bitcoin will likely crash to its previous lows,” he said.
In addition, Hayes warned that if such a scenario occurs, the effects will spread to other risky assets with the expectation that the pivot is likely to give Bitcoin more traction.
Bonds, stocks, and every cryptocurrency under the sun is smoking as the glue holding the US dollar-based global financial system together fades. If the Fed follows through on the pivot, Bitcoin will continue its strong performance, and this rally will be the beginning of a secular bull market.”
Potential bottom for Bitcoin
Interestingly, despite issuing the warning, Hayes said he expects the Fed to “move later to print money and avoid another financial meltdown.” If this is the case, as noted by the founder of BitMex, it would mark a local bottom for risky assets like Bitcoin.
It is important to note that investors and traders closely monitor the Fed’s monetary policy, and any change in its stance can greatly affect the markets. Especially with the CPI slowing, the Fed is likely to apply pauses to interest rates.
Bitcoin is rising after sustained declines
After consolidating below $17,000 for weeks, bitcoin rallied at some point and reclaimed the $23,000 level. The reason for the rise was lower US CPI numbers, which indicates a possible slowdown in interest rate hikes.
Accordingly, Hayes stated that the current gains could be part of Bitcoin’s recovery from the lows, but cautioned investors to expect another stabilization and sideways trading until USD liquidity conditions improve.
In fact, the current Bitcoin momentum has washed away the impact of the crash of cryptocurrency exchange FTX which saw the first digital asset test levels below $15,000. At the time of publication, Bitcoin is worth $22,822.
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