In a blog post released on February 8, industry leader Arthur Hayes announced a shift in his current crypto investment plans.
Hayes changes the tune of ‘Rangered Origins’
The current macroeconomic conditions arising from the US Federal Reserve have previously made Arthur Hayes eager to avoid what he calls “risky assets”.
With inflation slowing along with rate hikes by the Fed, multiple new storms are brewing in the US, and the Fed, Congress and Treasury will steer the economy as they see fit, he says.
The problem is guessing how these events will occur throughout the year. For Hayes, 2023 can be divided into two halves, with H1 being the ideal investment environment for cryptocurrency.
This contradicts an earlier thesis from mid-January, in which the former BitMEX CEO said he was standing on the sidelines for fear of a Fed-induced capitulation event hitting risk assets.
“My concerns about this potential outcome, which is likely hindered later in 2023, have led me to hold my excess capital in money market funds and short-term US Treasury bonds,” he explained.
“As such, the portion of my liquid capital that I intend to eventually use to buy cryptocurrencies is missing out on the current high which we are seeing on the local dips. Bitcoin is up nearly 50% from the $16,000 lows we saw around the FTX fallout.”
Contrasting the risky asset environment with 2009 and the start of quantitative easing, Hayes continued, bitcoin is far from a recovery despite its 40% gain in January alone.
S&P 500 (SPX) annotated chart (screenshot). Source: Arthur Hayes / Medium
The picture is complicated this year – quantitative easing gave way to quantitative tightening, as liquidity was removed from the US financial system at the expense of risky assets.
However, H1 appears to provide some relief, with some liquidity returning to avoid hitting the debt ceiling too soon. This could continue until Congress votes to raise the debt ceiling in the summer, which Hayes and others argue is inevitable.
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The cash in the Treasury General Account (TGA) would be emptied to the tune of $500 billion, eliminating the $100 billion monthly liquidity the Fed is removing.
“The TGA will be exhausted sometime in the middle of the year. Once exhausted, there will be a political circus in the US around raising the debt limit,” the blog post predicts.
“Given that the Western-led monetary financial system will collapse overnight if the US government decides to forego raising the debt ceiling and instead defaults on the assets underlying said system, it is safe to assume that the debt ceiling will be raised.”
Chart of US federal debt trends (screenshot). Source: US Treasury
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Then the tide will turn, and risky assets can once again become a thorn in the side of every investor.
Related: BTC Price Metric That Triggered Bitcoin’s Biggest Bulls Hit $23K
Hayes believes it’s all about timing. His plan is to move to cash in US dollars, where he can move into assets with specific risks. At the top of the list appears to be Bitcoin.
“I’ll spread over the coming days. I wish my volume really mattered, but it’s not — so please don’t think that when this happens it will have any noticeable effect on the price of the orange coin,” he told readers.
However, going forward, altcoins represent a huge opportunity, as the blog post explains in its conclusion, also subject to timing.
“The key to shitcoining is understanding that it moves up and down in waves. First, the reserve of crypto assets — namely Bitcoin and Ether — goes up. Hayes writes about crypto market cycles:
“At the same time, the shitcoin pool is on a violent rise. Then shitcoins rediscover the oomph, and interest shifts back to Bitcoin and Ether. This stair-climbing process continues until the secular bull market ends.”
