Arthur Hayes on the Current Crypto Market Conditions
Arthur Hayes on the Current Crypto Market Conditions
Former BitMex CEO Arthur Hayes published a new article on Sunday. The piece lays out the current macro market conditions from his perspective and includes a few price predictions for the majors (BTC, ETH, etc.) over various time frames.
It’s worth noting that much of what Hayes posts is from a trader's perspective. He is a trader, after all. So we have to keep that in mind when he talks about price points. He takes an overview of the market from a macro perspective to make clear decisions about allocating capital. Most retail investors are best served by accumulating positions in crypto assets they believe in fundamentally.
He predicts $1M bitcoin in this article. He also predicts $30K bitcoin on a shorter timeframe. So, the real prediction is a bumpy road ahead. BTC will fluctuate before reaching six (or seven) digits, and determining the investment horizon matters.
It also matters whether you are a trader or an investor. It’s tempting to be both or switch between the two mindsets, but it is often better to choose one and stick to it. That said, let’s get into it.
For the full pictures of Hayes’ thoughts, it’s best to read his article. He goes into a technical depth that I won’t get into here.
I will highlight a few of his points that stood out to me:
“The inconvenient truth that haunts crypto at this current juncture is that crypto moves in lockstep with the debt-based, un-free risk asset markets like global developed market equities.”
Hayes makes a multi-step correlation between the crypto markets, the equity markets, and the Fed. He believes the crypto markets move in lockstep with the equity markets, and the equity markets are currently propped up by the Fed.
Tightening Fed monetary policy will crush the equity markets, and crypto will follow.
He also acknowledges those within the crypto space who are working to shift the perception of crypto towards being priced and valued on the merit of the underlying technology—as opposed to simply another highly volatile risk asset.
“[Zoltan Pozar’s writing on the current state of global trade] will leave you convinced that higher prices are here to stay, and global growth — which is a derivative of the cost of energy– must slow.”
This is an interesting point that mirrors some of my recent thoughts around bitcoin mining as a function of the expansion of energy production itself over the long term. If you believe in rising energy production and falling energy costs, then bitcoin (and most crypto, really) is a call option on that growth.
Hayes seems to believe here that Russia’s exile from the global supply chain will increase energy prices, and if energy prices are a proxy for global growth, then growth will slow.
“The great thing about a 24/7 [crypto] market accessible to all humans with an internet connection is that things happen quickly.”
Hayes argues that crypto capital markets are the only truly free markets in the global financial economy. This is true - and until they become more regulated, we get to see market phenomena play out in real-time faster than the slower moving equity markets.
As the global equity markets turn down, the crypto markets will lead the way.
The question that remains is whether crypto alts will lead the majors downward or if the majors will lead alts.
During both bull runs in 2021, bitcoin led the spikes in alts by about a month. Many think of BTC as a leading indicator of imminent price spikes in alts.