Arthur Hayes, the BitMEX co-founder and Maelstrom’s Chief Information Officer expressed his thoughts about the upcoming Fed interest rate cuts on September 18. He believes the rate cut will cause a major market slump, leading to a bull run afterward.
Hayes, who spoke during the TOKEN2049 event in Singapore, explained his thoughts during his keynote speech. The speech, Thoughts on Macroeconomics Current Events, offered an in-depth look into the Fed’s decision and how it could potentially affect crypto markets.
The Fed announced its plans to initiate interest rate cuts after reviewing the latest Employment Report from the Labor Department on September 6. The rate cut is expected during the Federal Open Market Committee meeting scheduled for September 17 and 18. The cut will also be the first the Fed has initiated since the COVID-19 pandemic, marking the imminent decision as the first in four years.
Several economists speculated about the rate cut. Many believed the Fed would opt for a 25-basis-point rate cut over a 50-basis-point or 75-basis-point rate cuts.
Several economists also speculated that the expected 25 basis point Fed rate cuts would initiate a drop in Bitcoin prices, among other high-risk assets. Steve Hanke, a Johns Hopkins University economist, explained that a 25 basis point rate cut would trigger ‘sell the news’ event for high-risk assets.
Hayes questions the Fed rate cut decision
Arthur Hayes: a Fed rate cut could crash the market
Is it really likely to happen anytime soon?
About this & Which tokens to look out for 🧵⬇️
Arthur Hayes, co-founder of BitMEX and CIO at Maelstrom, shared his views on the macroeconomic outlook and its impact on crypto markets… pic.twitter.com/7xrxZ5mzz4— Depression (@0xDepressionn) September 18, 2024
Hayes has openly questioned the Fed’s decision to cut interest rates. The BitMEX co-founder pointed out the massive rate at which the U.S. government has been minting and spending U.S. dollars. Hayes further mentioned the high rates of inflation recorded, standing at 150 to 200 basis points above what the Fed considers neutral.
The Maelstrom CIO divulged that he expected the rate cut to be between 50 and 75 basis points. Hayes still explained that despite the anticipation for the rate cut to ‘pump up the jam,’ making borrowing services cheaper could increase inflation. Arthur also said that lowering interest rates could narrow the interest rate differential between the USD and Japanese Yen.
So far, the Bank of Japan has increased its interest rates, while the Federal Reserve plans to decrease its rates. Several analysts believe the Japanese yen will continue rallying while the US dollar plunges.
Ethereum and other crypto could overtake T-bills
Hayes compared treasury bills to crypto, including Ethereum. The crypto guru explained that, so far, Treasury bills offer more yields than cryptocurrencies. However, Hayes stated that if Treasury yields drop, several cryptocurrencies could benefit from the low yields and current interest rates.
The Maelstrom CIO explained that cryptocurrencies such as Ether (ETH & Ether.fi), Ethena (ENA & USDe), and Pendle (PENDLE) could benefit if T-bills registered lower yields. Hayes revealed BTC staking and staking in Ethereum and Pendle, respectively, as projects that could overtake T-bills. Hayes, however, criticized RWAs, such as Ondo, saying investors can lack interest in them in case T-bills lose value.
Hayes also defended Ethereum to investors who spread the narrative that it lacks performance. The Maelstrom CIO explained that investors could trigger the bull run after the market plunge using Ethereum and assets like it. The crypto guru described ETH as the ‘Internet Bond,’ mentioning its yield of up to 4%.
