Why Bitcoin price has nothing to do with the Fed’s rate cut? Ex-BitMEX head explains
Arthur Hayes Explains Why Fed Rate Cuts Won’t Help Bitcoin
According to Arthur Hayes, former chief executive of BitMEX, funds are moving from Treasuries to repurchase agreements, which offer higher returns.
BitMEX co-founder and former CEO Arthur Hayes shared his views on why the Fed’s rate cuts may not have much impact on Bitcoin prices.
In a Sept. 2 article, the Maelstrom chief investment officer noted that despite Fed Chairman Jerome Powell all but confirming a September rate cut in his Jackson Hole speech on Aug. 23, Bitcoin prices have struggled and fallen since then.
Since the speech, BTC prices surged as high as $64,000 before falling 10% to a low of $57,400 on Sept. 2. As of the time of writing on Sept. 3, BTC prices have recovered slightly to $59,238.
Hayes explained that the reason is that large money market funds are moving cash from Treasury bonds to repurchase agreements (RRPs), which have a yield of 5.3%, higher than the 4.38% of Treasury bonds.
He pointed out that this development goes against the assumption that low interest rates are good for risky assets such as Bitcoin. Many believe that low interest rates encourage borrowing and spending, thereby increasing market liquidity, and a weaker dollar may make Bitcoin look stronger.
According to the Chicago Mercantile Exchange, there is a 69% probability that the Federal Reserve will cut interest rates by 25 basis points at its September 18 meeting, and a 31% probability of a 50 basis point cut. A larger rate cut would indicate a more aggressive stance by the Federal Reserve, which could trigger a more drastic market reaction and thus boost economic activity to a greater extent.
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