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Sugar High: Arthur Hayes Predicts Bitcoin Surge, Cites US Rate Cuts and Shifts in Yen Carry Trade
- The current economic situation sits on a knife edge, with high cost of living causing stress among several Western nations.
- Arthur Hayes, founder of BitMEX, believes that the rate cuts posed by the US Feds will provide markets with an unsustainable “sugar hit” that will cause further inflation.
- He argues that this may end up strengthening the Yen (relative to USD), increasing economic troubles and eventually causing a re-occurrence of high inflation.
- While this could spell trouble for certain businesses and everyday spenders, he believes limited-supply assets like Bitcoin are set to benefit.
Since Bitcoin’s recovery from the early August market crash, the coin has been hovering around the US $60k (AU $88k) mark. Where the digital currency heads from here has been the catalyst for significant speculation among analysts. Are we headed to a new all-time high, or will the market see more sideways movement for the time being?
Co-founder of exchange BitMEX, Arthur Hayes, has weighed in on Bitcoin’s short-term future in a Medium blog post – and BTC bulls will be pleased with his thoughts.
Related: US Spot Bitcoin ETFs Account for Over 4% Of All BTC, Closing in On Satoshi’s Stack
Inflation Could be Back on the Menu if Rate Cuts Prove Premature
The Covid-19 pandemic resulted in a major economic event the world hasn’t experienced in decades. To prevent a global recession due to lockdowns, governments pumped money into businesses and dropped interest rates to record lows.
While this prevented an immediate disaster, the long-term outlook caused a supply squeeze and rising inflation around the globe. To combat this, Reserve Banks flipped the switch and started pumping interest rates higher and higher – making safe assets like bonds and high-interest savings accounts more appealing than risky alternatives like crypto.
But Hayes believes the US Feds are preparing for a September rate cut, which may send Bitcoin on a “sugar high” in the coming months.
Bitcoin “2 Da Moon!”
Interestingly, Hayes argues that based on current balance sheets and fiat strength, Governments should be raising interest rates, not cutting them.
The US economy post-COVID has only experienced two-quarters of negative real GDP growth. This is not a weak economy in need of rate cuts.
Arthur Hayes A lot of Hayes’ economic theory falls on the Japanese Yen. As we saw earlier in August, when the strength of the Yen rises, traders lose their minds. This is because trillions worth of carry trades are made in the Japanese Yen, leveraging the currency’s low rates as an arbitrage opportunity.
The Fed rate cut sugar high might be short-lived if traders resume unwinding dollar-yen carry trade positions if the yen surges in value. Doing more rate cuts to stop the fall in various financial markets will only strengthen the yen and cause more positions to be unwound
Arthur Hayes In short, Hayes believes that the US cutting rates is an overreaction to the strengthening Yen. He argues it’s a politically-motivated decision designed to provide voters with a “sugar” rush that may result in another “money printer goes BRRRRRR” situation – sparking another bout of inflation.
Related: Over 85,400 People with $1 Million+ BTC: 2024 Saw “Explosive Growth” of Crypto Millionaires
And while this may be bad for the general economy, Bitcoin is poised to benefit.
…They [the Federal Reserve] will dramatically increase the money supply. That leads to inflation, which could be bad for certain types of businesses. But for assets in finite supply like Bitcoin, it will provide a trip at lightspeed 2 Da Moon.
Arthur Hayes 
Author
Ben Knight
Ben Knight is a writer and editor from Melbourne with a passion for all things music and finance. He enjoys turning complex topics – especially the technical details of cryptocurrency – into digestible bites that anybody can understand. He acquired his Master’s in Writing, Editing and Publishing from RMIT in 2019 and has run his own creative writing business ever since.
