Arthur Hayes Explains Why Fed Rate Cuts Might Not Save Bitcoin
Former BitMEX CEO and co-founder Arthur Hayes has offered his perspective on why a reduction in interest rates by the US Federal Reserve might not have a significant impact on Bitcoin prices. In an August 23 address in Jackson Hole, Federal Reserve Chair Jerome Powell all but confirmed a rate decrease in September. Despite this, the chief investment officer of Maelstrom, in a post on X, stated that Bitcoin values had subsequently fallen and struggled.
Bitcoin prices have dropped 10% since the speech, peaking at $64,000 for a short while before decreasing to $57,400 on September 2. At the time of writing on September 3, it has marginally rebounded to trade at $59,102.
Bitcoin Liquidity Declines as RRPs Attract Capital, Hayes Warns
In explaining his reasoning, Hayes cited reverse repurchase agreements (RRPs), which are sales of securities with an agreement requiring their acquisition at a later date at a higher price, citing the 5.3% interest rate as only one example. Compared to Treasury bills, which have shorter maturities and offer lower yields of 4.38%, this is higher.
Large money market funds are consequently shifting their holdings from Treasury bills to RRPs, which has the effect of reducing the amount of money available in the market for riskier assets like cryptocurrency, according to Hayes. According to their explanation, capital remains in the parking lot rather than circulating throughout the economy since it pays more than other secure investments. Hayes notes that RRPs have taken another $120 billion since the Fed announced in September that it would cut interest rates.
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