As the United States Federal Reserve approaches its first rate cut in four years, BitMEX co-founder Arthur Hayes has offered his insights on the potential impacts on the cryptocurrency market during his keynote at Token2049 in Singapore on Sept. 18.
The speech, titled “Thoughts on Macroeconomics Current Events,” explored the financial dynamics of holding Treasury bills with a 5% yield versus investing in cryptocurrencies amid impending market shifts triggered by the Fed’s decision.
Before delving into cryptocurrency implications, Hayes criticized the Federal Reserve for its strategy.
“I think that the Fed is making a colossal mistake cutting rates at a time when the US government is printing and spending as much money as they ever have in peacetime,” he commented, predicting a market collapse shortly after the rate cut.
According to Hayes, the likely reduction in rates—anticipated to be between 50 to 75 basis points—could destabilize markets by reducing the interest rate differential between the US dollar and the Japanese yen.
“We saw what happened a few weeks ago when the yen went from 162 to about 142 over about 14 days of trading. That caused almost a mini financial collapse,” he explained.
Hayes then compared the yields on cryptocurrencies to those of Treasury bills, questioning the appeal of riskier investments when more secure options like T-bills offer comparable returns.
“Because why would you invest in a riskier DeFi application when all you can do is call up your broker and put your money in T-bills and make 5.5%?” he questioned.
Focusing on the performance of cryptocurrencies like Ether, Hayes pointed out its recent underperformance compared to Bitcoin and labeled it an “internet bond” with a 4% yield. Despite current trends, he remains invested, foreseeing a potential rebound.
“If the yield drops quickly, which I believe it will, then Ethereum becomes money, and I’m earning more,” Hayes speculated, concluding with a broader market prediction:
“As we see rates quickly decline, as I expect, because the Fed is going to cut rates, markets are going to tank and they’re going to say, well let’s do more of that because that’s what’s going to fix things. We could reignite the Ethereum bull market.”