March banking crisis rerun risks 40% Bitcoin price crash — Arthur Hayes
2024.01.05 09:05
Bitcoin (BTC) trading OG Arthur Hayes now predicts an up to 40% BTC price crash in March.
In a blog post on Jan. 4, the former CEO of crypto trading giant BitMEX warned readers of a week of turmoil due to hit financial markets.
Hayes on BTC price: “I could easily see a 30% to 40% correction”
Bitcoin bulls are feeling broadly confident this year as the United States’ first spot Bitcoin exchange-traded funds (ETFs) are slated to get regulatory approval.
Combined with the block subsidy halving in April, the events constitute what could be a landmark year for BTC price expansion thanks to institutional money and wider adoption.
That said, for Hayes, all is not destined to go up in a straight line. The reason, he says, lies with the U.S. Federal Reserve and its attempts to steady an economy that is cutting inflation but saddled with instability.
In particular, March will see the Fed’s Bank Term Funding Program (BTFP) — a facility set up in response to the 2023 regional banking crisis — come to an end. One week later, the Federal Open Market Committee (FOMC) must decide whether to hike, hold or lower interest rates.
“The BTFP expires on March 12th, and the Fed rate decision is announced on March 20th. There are six trading days between these two crucial decision points,” Hayes noted.
“If my forecast is correct, the market will bankrupt a few banks within that period, forcing the Fed into cutting rates and announcing the resumption of the BTFP.”
Bitcoin and crypto are highly sensitive to changes in macro liquidity, and a Fed bailout would certainly help their cause — but only after an initial shock caused by a rerun of the 2023 volatility.
“Bitcoin initially will decline sharply with the broader financial markets but will rebound before the Fed meeting. That is because Bitcoin is the only neutral reserve hard currency that is not a liability of the banking system and is traded globally,” Hayes continued.
“Bitcoin knows that the Fed ALWAYS responds with a liquidity injection when things get bad.”
He added that Bitcoin “knows printed money in whatever guise is always printed money,” and that it would thus “rise sharply before and into the Fed’s eventual capitulation to restarting money printer go brrr.”
The kind of drop on the cards lies between 20% and 30% from the level at which BTC/USD trades when March begins. The halving, Hayes explains, will then serve as the ultimate catalyst for upside continuation.
He summarized:
“I could easily see a 30% to 40% correction due to a dollar liquidity rug pull. This is why I cannot buy Bitcoin until these March decision dates have passed.”
Bitcoin analysts stay split on ETF impact
Closer to the present, ETF approval narratives continue to induce BTC price volatility of their own.
Related: Bitcoin bull market metrics ‘almost reset’ as BTC price hovers at $43K
Concerns over a potential rejection sparked a near 10% rout this week. At the same time, various commentators believe that Bitcoin is already due a more substantial correction — even if the ETFs become a reality.
Arguing against this is John Bollinger, creator of the Bollinger Bands volatility indicator, who predicts a positive reaction based on his tool’s readings.
“I think it breaks higher,” he concluded on X (formerly Twitter) about BTC/USD.
BTC/USD chart with Bollinger Bands data. Source: John Bollinger/TrendSpider
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
