Altcoin
Arthur Hayes shares his top altcoins
In his most recent publication, dated May 2, 2024, Arthur Hayes, the founder of the BitMEX exchange, shared his insights into the cryptocurrency market’s recent tumultuous behavior and broader macroeconomic signals shaping potential future trends. Titled “First of May,” his essay directly addresses the cryptocurrency market, which has seen significant volatility since mid-April.
The invisible printing of money is starting
Hayes begins by highlighting the observable difficulties in cryptocurrency markets, which he attributes to a confluence of factors including the end of the US tax season, anticipatory concerns about Federal Reserve policy decisions, the Bitcoin halving event e stagnant growth in assets under management (AUM) for US Bitcoin exchange-traded funds (ETFs).
He interprets these factors as a necessary elimination of speculative excesses, stating: “Tourists will sit on the beach in the next phase… if they can afford it. We tough motherfuckers will hold and if possible accumulate more of our favorite crypto reserve assets like Bitcoin and Ether and/or high beta shit coins like Solana, Hat with dogand dare I say Dogecoin (the OG dog coin).”
A significant portion of Hayes’ analysis focuses on the Federal Reserve’s recent adjustment to its quantitative tightening (QT) program. Previously set at a reduction of $95 billion per month, the Fed brought this figure back to $60 billion.
Hayes interprets this as a covert form of quantitative easing, injecting an additional $35 billion per month into the dollar’s liquidity reserve. He explains: “When you combine interest on reserve balances, RRP payments and interest payments on US Treasury debt, the reduction in QT increases the amount of stimulus provided to global financial markets each month.”
Hayes also examines the actions of the US Treasury, particularly Secretary Janet Yellen. He discusses the Treasury Quarterly Refund Announcement (QRA), which outlines expected borrowings and cash balances for the coming quarters. For the second quarter of 2024, the Treasury expects to borrow $243 billion, a figure that Hayes points out is $41 billion higher than the previous forecast, due to lower-than-expected tax revenues.
He predicts that this increase in the supply of Treasury securities could lead to higher long-term rates, a situation that Yellen could counter with yield curve control measures, a scenario that could catalyze a significant rally in Bitcoin and cryptocurrency prices .
Hayes talks about the failure of First Bank of the Republic, highlighting the response of monetary authorities as a key indicator of systemic fragility. He criticizes the federal safety net that ensures that all depositors are safe, arguing that it masks deeper vulnerabilities within the U.S. banking system and leads to a covert form of money printing, since uninsured deposits are effectively guaranteed by the government. This, Hayes argues, is a fundamental misalignment that could lead to significant inflationary pressures.
Buy cryptocurrencies in May and walk away
Hayes is candid about his investment strategies in the current environment. He supports the purchase now. “I am buying Solana and doggie coins for momentum trading positions. For long term bullshit positions, I am increasing my allocations to Pendle and will identify other tokens that are “for sale”. I will use the rest of May to increase my exposure. And then it’s time to set it, forget it, and wait for the market to appreciate the inflationary nature of recent U.S. monetary policy announcements.”
He concludes with a broad prediction that despite recent market volatility, underlying liquidity conditions created by US monetary and fiscal policies will provide a floor for cryptocurrency prices, leading to a gradual upward trend. “While I don’t expect cryptocurrencies to fully and immediately realize the inflationary nature of recent US monetary announcements, I do expect prices to drop, break down, and begin to slowly rise,” he says, signaling his bullish outlook.
For Bitcoin, Hayes expects the leading cryptocurrency to recapture the key $60,000 level and then move into a $60,000 to $70,000 range through August due to the annual summer lull.
At the time of writing, BTC was trading at $59,393.
Featured image by Onooki, TradingView.com chartist