Renowned cryptocurrency expert Arthur Hayes has weighed in on the current state of Bitcoin, predicting a period of consolidation around the $25,000 mark in the coming months.
Hayes, the co-founder and former CEO of BitMEX crypto exchange, shared his insights in a Thursday, August 24 blog post that delved into economic and political factors shaping the market.
In his comprehensive analysis, Hayes explored the concept of fiscal dominance, wherein government debt and deficits could contribute to elevated inflation that surpass the intentions of central banks. He elucidated how governments might opt for inflation taxation by increasing the supply of non-interest-bearing government debt. According to him, this strategic approach could potentially lead to profound consequences, including implications for the monetary sector.
“Does it make sense now why banks and asset managers all of the sudden warmed up to crypto as soon as their competition was deaded?” Hayes asked. “They know the government is coming for their deposit base, and they need to make sure that the only available antidote to inflation, crypto, is under their control.”
According to Hayes, if cryptocurrencies make a more enormous impact on the monetary system than the Eurodollar market, these institutions could recover their losses caused by unfavourable banking regulations by taking control of cryptocurrencies for their massive deposit bases, which are worth trillions of dollars.
However, Hayes envisioned a pivotal role for major financial establishments such as banks and asset managers in the evolving crypto landscape. He speculated that with potential regulatory changes and financial innovations, these institutions could play a pivotal role in channelling capital into crypto-related products, thereby serving as alternatives to conventional banking options.
Bitcoin to stagnate at $25,000?
Considering the prevailing market conditions, Hayes acknowledged the possibility of transient volatility for Bitcoin. He projected that the cryptocurrency might experience consolidation throughout the current quarter.
“While there are those who speculate that Bitcoin’s value might drop below $20,000, I am inclined to believe that the initial phase of Q3 will be marked by fluctuation around the $25,000 mark. The capacity of the crypto market to endure these fluctuations will be directly linked to the extent of interest income seeking novel opportunities,” he stated.
Hayes, however, expressed unwavering confidence in Bitcoin’s long-term potential and its role as a substitute store of value, maintaining that despite the oscillations in the market, the fundamental principles of cryptocurrencies and blockchain technology remain steadfast.
He also highlighted the importance of holding a diversified portfolio, including cash and cryptocurrencies, to mitigate potential risks during market turbulence. “Instead of being afraid of this crypto weakness, I shall embrace it. Because I use no leverage in this part of my portfolio, I don’t care if there are massive wicks down in price,” he added.