In his latest blog post titled “Yellen or Talkin’?” dated January 24, Arthur Hayes, the former CEO of BitMEX, has delivered a bearish short-term price prediction for Bitcoin (BTC), suggesting it may encounter a significant drop to $35,000 or even lower.
Despite Bitcoin’s remarkable 75% increase over the past year, Hayes identifies a confluence of factors that could contribute to this impending downturn.
One of the primary concerns outlined by Hayes is the ongoing Red Sea conflict between the United States and the Houthis, which is having ramifications on global shipping.
He notes that this conflict could lead to increased inflation as risk assets, including cryptocurrencies, anticipate a potential shift by the Federal Reserve in March, involving reduced interest rates to attract liquidity back into the market.
Hayes highlights that elevated shipping costs, driven by weather and geopolitical issues, may cause a surge in inflation during the third and fourth quarters of the year.
To combat this, he speculates that Fed Chair Jerome Powell will engage in verbal intervention, signaling potential rate cuts without actually implementing them.
Hayes emphasizes that Bitcoin is uniquely positioned to benefit from this scenario, as it thrives in times of economic uncertainty.
Another factor Hayes touches upon is the state of the U.S. regional banking sector.
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He mentions that since the financial crisis in March 2023, the U.S. government has provided support through the Bank Term Funding Program (BTFP), which is set to expire soon.
Despite lingering financial problems within the banking sector, Hayes believes that the fate of liquidity and other related issues rests on Treasury Secretary Janet Yellen’s future decisions.
Hayes suggests that a few banks may need to fail if the BTFP is not renewed to pave the way for the cuts, QT taper, and potential resumption of Quantitative Easing (QE) that the market expects in March.
He asserts that the only thing that could surpass fighting inflation in priority is a financial crisis.
Regarding Bitcoin’s price, Hayes predicts that it could experience a substantial correction, potentially reaching $33,600, or a 30% decline from its peak after ETF approval at $48,000.
He believes that Bitcoin might find support within the range of $30,000 to $35,000.
As a result, Hayes has taken a position by purchasing put options with a strike price of $35,000 expiring on March 29, 2024.
This sub-$35,000 level, according to Hayes, presents an opportunity for investors to capitalize on the impending market dip.
On January 23, BTC/USD briefly touched $38,500 on Bitstamp, its lowest point since early December, before rebounding approximately $1,700 higher, as indicated by data from Cointelegraph Markets Pro and TradingView.
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