Bitcoin faced a significant decline today, falling below the $64,000 mark to a low of $63,564. This drop represents a 2.5% drop in the last 24 hours and a 12% drop in the last two weeks. During this downturn, Arthur Hayes, the founder of BitMEX, not only maintained his bullish stance on Bitcoin but actively encouraged investment, promoting the strategy of ‘buying the dip.’ His hope and advice is focused on analyzing global economic conditions and central bank policies, which he believes will favor cryptocurrencies such as Bitcoin.
Buy Bitcoin Dip?
Hayes’ comments draw attention to the aggressive monetary policies used by central banks, particularly the US Federal Reserve. These policies, including rapid interest rate hikes—the most aggressive since the 1980s—were triggered by inflation in the United States. The hike had a major impact on the bond market, particularly US Treasuries (USTs), which saw prices fall due to rising yields. Japanese banks, seeking yield amid near-zero domestic interest rates, have invested heavily in these USTs.
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This strategy failed when US rates rose, leading to huge paper losses for these banks. Hayes directly points to the situation with Norinchukin Bank, which was forced to sell $63 billion in foreign bonds, mainly USTs, to reduce these losses. The situation underscores a broader trend among Japanese banks, which may need to continue loading USTs and other foreign bonds as they adjust to the new economic realities imposed by US monetary policy.
Hayes says these developments have significant implications for the crypto market, particularly Bitcoin. He notes that central banks’ responses to stabilizing financial markets—such as the Federal Reserve’s decision to provide a backstop in March 2023 following a series of bank failures—indirectly benefit cryptocurrencies. This intervention led to an increase in the price of Bitcoin, strengthening its status as an alternative currency in times of financial instability.
In addition, Hayes details the operation of the FIMA repo facility, which was expanded by the Fed to strengthen capital purchases. He explains, “The increase in the FIMA repo facility reflects the increase in dollar liquidity in global financial markets. You know what that means with Bitcoin and crypto … that’s why I felt it necessary to warn readers about another sector of money printing by stealth.” This process allows central banks to exchange their USTs for dollars, increasing the dollar supply without flooding the market with bonds and potentially raising yields.
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The implications of Bitcoin and other cryptocurrencies are profound, according to Hayes. He suggests that since central banks, particularly the Bank of Japan, may use these institutions to manage their exposure to USTs, the resulting increase in dollar value may drive investors to cryptocurrencies. The move is seen as a hedge against potential inflation and devaluation caused by this monetary expansion.
Hayes clearly describes the effect of these macroeconomic manipulations on the crypto market: “As many began to wonder where the dollar’s slide would come from, the Japanese banking system lowered the Origami cranes of dollar debt that collapsed in an instant. investors. This is another pillar of the crypto bull market. The supply of dollars must increase to maintain the corrupt dollar-based monetary system of Pax Americana. “
In an interview to the crypto community, Hayes concluded, “Say with me, ‘Shikata Ga Nai’, and buy a spectacular dip!” With this announcement, he emphasizes his belief that despite the volatile market conditions, fundamental economic and financial developments are creating favorable conditions for the growth of Bitcoin. His analysis suggests that prudent investors should view the current price drop as a buying opportunity, given the broader economic environment that he believes will continue to stimulate interest and investment in cryptocurrencies.
At press time, BTC traded at $64,159.
Featured image from Forkast News, chart from TradingView.com
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