Following losing momentum over the weekend, the price of bitcoin surged on Tuesday after data from the US consumer Price Index (CPI) Rate Showed signs of cooling. The Fed released its first report on inflation on Tuesday, and Fed Chair Jerome Powell will talk on Wednesday, putting BTC into a volatile week.
However, the largest cryptocurrency by market cap, Bitcoin, could outperform the stock markets in 2023. Billionaire Arthur Hayes has identified a catalyst and has said that a bleak macroeconomic backdrop would cause the Federal Reserve to eventually loosen its monetary policies next year.
In a new interview with crypto expert Scott Melker, Hayes said that next year, the Fed may have a pivot because the treasury market and the investment-grade corporate bond market might become ‘dysfunctional’. He then explained what he meant by them becoming ‘dysfunctional’ and said :
“You have a bunch of supply with no buyers. The Fed is not buying, the Treasury is not buying – they’re actually issuing paper. All large foreign, non-US governments are mostly net sellers of treasuries so that would be Japan and China.”
He then added, “If you see accelerating more deals of Middle Eastern countries selling their oil not in dollars but also, at least, the lowest recycling of dollars, less purchases of treasuries and yet at the same time, you have all-time high issuances of debt because the baby boomers in the US are aging. They have entitlements – social security, Medicare.”
Talking about the tension between Russia and Ukraine, he said that there might be a recession. He believes that the treasury market is effectively telling us that there will be a recession next year since the three-month, 10-year spread, which many economists regard to be the actual recession signal, has turned negative.
Further talking about the solution, he said that more currency must be issued in order to maintain the social safety net. The politics of the corporate bond and treasury markets, in his opinion, will require that the Fed, at the very least, take a break from injecting money into the market and, at the very most, start doing so sometime next year.