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Arthur Hayes predicts an imminent bull run for Bitcoin as G7 central banks begin to ease monetary policy
Co-founder of BitMEX Arthur Hayes believes that recent policy changes by global central banks herald the start of a significant bull market Bitcoin and high-potential altcoins.
In his latest blog post, “Group of fools,” Hayes explained how these changes in monetary policy create fertile ground for the growth of the cryptocurrency market.
Hayes highlighted the recent rate cuts by the Bank of Canada (BOC) and the European Central Bank (ECB) as crucial moments. The decisions mark the first time in years that G7 countries have reduced their key interest rates.
According to Hayes, this change will inject new energy into the cryptocurrency market. He said:
“The trend is unmistakable. Central banks are starting to ease monetary policies. This is the time to invest heavily in Bitcoin and altcoins.”
Central bank easing
At the heart of Hayes’ criticism is the G7’s management of the Japanese yen, which he says is misleading.
Hayes previously suggested that the US Federal Reserve (Fed) should exchange unlimited quantities of newly printed dollars with the Bank of Japan (BOJ) for yen. This move, he speculated, would give the Japanese Ministry of Finance unlimited dollar resources to buy yen in global forex markets, thus strengthening the yen.
However, he noted that the G7’s current strategy appears to be focused on convincing markets that the interest rate differential will narrow over time, which he believes will lead to buying yen and selling other currencies.
The crux of Hayes’ argument lies in the disparity between the BOJ’s 0.1% policy rate and the 4% to 5% rates of other G7 central banks. He argues that this differential fundamentally drives exchange rates.
He further explained that during the pandemic, central banks around the world provided cheap money to counter economic slowdowns, but rising inflation forced everyone except the BOJ to raise rates aggressively. The BOJ’s inability to raise rates stems from its massive holdings of Japanese government bonds (JGBs). An increase in rates would cause JGB prices to fall, resulting in significant losses for the central bank.
Hayes stressed that cutting rates to narrow the interest rate differential is the only viable option left for the G7, despite inflation still running above target levels for most of these central banks.
Hayes said recent rate cuts by the BOC and ECB are strange, given that inflation in both regions remains above 2% targets. She speculated that these cuts could be a coordinated effort to manage the value of the yen and prevent a potential devaluation of the Chinese yuan, which could destabilize the global financial system.
Looking ahead, Hayes expressed doubts about the possibility of the Fed cutting rates so close to the upcoming US presidential election market speculation. He predicted that the Fed and BOJ are likely to maintain their current policies in upcoming meetings, with a potential surprise rate cut by the Bank of England (BOE) after the G7 summit.
Hayes concluded that recent rate cuts signal the start of an easing cycle, which he believes will reinvigorate the cryptocurrency market.
New highs
Hayes sees these conditions as a catalyst for the cryptocurrency market. He has indicated that he is shifting his investments from stablecoins to “high-conviction shitcoins,” although he intends to disclose specific tokens only after securing his positions.
It also urged projects within its Maelstrom portfolio to proceed with token launches without delay.
Reflecting on historical trends, Hayes noted that both traditional stocks and Bitcoin have historically rallied during periods of low interest rates.
He highlighted Bitcoin’s dramatic rise from under $4,000 to $64,000 between March 2020 and April 2021, following the Fed’s dramatic rate cut to 0.25%.