BTC Halving Sparks Crypto Assets Firesale

According to BitMEX co-founder Arthur Hayes, the upcoming Bitcoin halving and the actions of the Federal Reserve and Treasury will contribute to a significant decline in the crypto market for several weeks. While Hayes believes that the halving will ultimately lead to higher prices in the medium term, he cautions that prices could experience negative fluctuations before and after the event. He argues that the prevailing belief in the positive impact of the halving will actually have the opposite effect, as the market tends to move against consensus expectations.

Hayes also suggests that the timing of the halving coincides with a period of tighter dollar liquidity, due to the policies of the Federal Reserve and Treasury. He predicts that this combination will result in a widespread sell-off of crypto assets. Hayes acknowledges that the market could defy his bearish outlook and continue to rise, expressing his own long-term optimism for cryptocurrencies.

In addition to these factors, Hayes points out that the second half of April will be a precarious period for risky assets due to tax payments in the U.S. draining liquidity, the Federal Reserve beginning Quantitative Tightening (QT) to decrease the money supply, and the Treasury’s General Account (TGA) potentially injecting additional liquidity into the system after May 1.

Given these circumstances, Hayes has decided to abstain from trading until May. Currently, Bitcoin has seen impressive gains of over 61% this year, reaching $71,170 from around $42,200. The Crypto Fear & Greed Index, which measures market sentiment, has also shown a rise in greed since January, with a score of 80 on April 9 indicating “Extreme Greed.”

Hayes concludes by stating that if his liquidity scenarios play out He will be more confident in investing in riskier assets. He prioritizes avoiding losses rather than maximizing gains in order to protect his portfolio and lifestyle.