Short-Term Plunge in Crypto After Rate Cuts

Speaking at Token2049 in Singapore, BitMEX co-founder Arthur Hayes painted a sobering picture of the potential aftermath of the Fed’s first rate reduction in four years.

Gm Singapore, It’s Fucking Fed Day!

My #Token2049singapore keynote is about which #crypto trades make sense in a falling interest rate environment.

See y’all sexy bitches at MBS, 12:15pm.

Yachtzee 😘😘😘😘😘😘

— Arthur Hayes (@CryptoHayes) September 17, 2024

Hayes’ perspective challenges the prevailing optimism, suggesting that what many see as a catalyst for growth could instead trigger a market downturn. Hayes’ keynote, titled “Thoughts on Macroeconomics Current Events,” delved into the complex interplay between traditional finance and the crypto markets.

The entrepreneur’s analysis focused on the comparative appeal of 5% Treasury bills versus cryptocurrency investments. He framed the discussion against the backdrop of anticipated market shifts following the Fed’s decision.

The Fed’s “Colossal Mistake” and Crypto Market Implications

In a bold statement, Hayes characterized the Federal Reserve’s consideration of rate cuts amidst increased government spending and dollar issuance as a “colossal mistake.”

He predicted a market collapse in the days following a potential rate cut, contrary to the widespread expectation of a market surge.

Hayes attributes this potential downturn to the narrowing interest rate differential between the U.S. dollar and the Japanese yen.

Hayes’ analysis extends to specific cryptocurrencies, comparing their yields to those of Treasury Bills. He highlighted Ethereum’s underwhelming performance relative to Bitcoin, describing it as an “internet bond” with a 4% yield.

However, Hayes remains invested in ETH, anticipating that a rapid yield drop could revitalize its status as “money.” The entrepreneur also discussed other tokens like Ethena (ENA), Pendle (PENDLE), and Ondo (ONDO).

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