In a blog post published on Feb. 8, industry guru Arthur Hayes announced changes to his current cryptocurrency investing plans.
Hayes changes mind on ‘risk assets’
The current macroeconomic conditions at the Federal Reserve have Arthur Hayes looking to steer clear of what he calls “risky assets”.
With inflation slowing as the Fed raises rates, a new storm is brewing in the U.S., and the Fed, Congress and Treasury will steer the economy as they see fit.
So, how will these events play out throughout the year? For Hayes, 2023 can be divided into two halves, and H1 is the ideal investment environment for cryptocurrencies.
This is in stark contrast to an earlier paper in mid-January in which the former BitMEX CEO said he was on the sidelines amid concerns that a Fed-induced capitulation would affect risky assets.
“My concern about this potential outcome, which I think is likely to happen by the end of 2023, is causing me to put my spare money in money market funds and U.S. Treasuries. Short term.”
“As a result, some of the working capital I plan to eventually use to buy crypto has missed the current massive bull market from local lows. Bitcoin is up almost 50% from the $16,000 lows we saw after the FTX crash. “
Hayes went on to say that despite comparing the risk asset environment to 2009 and the start of quantitative easing, which saw a 40% gain in January alone, Bitcoin’s recovery may be far from complete.
S&P 500 (SPX) chart. Source: Arthur Hayes/Medium
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This year, things have gotten complicated — quantitative easing has given way to quantitative tightening, the removal of liquidity from the U.S. financial system at the expense of risky assets.
However, H1 appears to have provided some relief, with some liquidity restored to avoid hitting the debt ceiling prematurely. That could continue until Congress votes in the summer to raise the debt ceiling, which Hayes and others see as inevitable.
Cash in the Treasury General Account (TGA) will expand to $500 billion, removing the $100 billion monthly liquidity marker the Fed is removing.
“The TGA will run out around the middle of the year. Immediately after it dries up, there will be a political circus in the US focused on raising the debt ceiling.”
“Given that the Western-dominated fiat financial system would collapse overnight if the US government decided to forego raising the debt ceiling and instead default on the assets underpinning said system, it is safe to assume that the debt ceiling will be raised.”
US federal debt chart.Source: U.S. Department of the Treasury
Then the situation will change, and risky assets will become a thorn in the eyes of every investor.
Hayes thinks it’s just a matter of time. His plan is to move into dollars, which can be turned into selected risky assets. Appearing at the top of the list is Bitcoin.
“I will be putting money into Bitcoin in the next few days. Of course, I am not large enough to make any fluctuations in the price of BTC, and it does not matter.”
Looking ahead, however, altcoins represent a huge opportunity.
“The key to shitcoins is understanding how they go up and down in waves. First, the crypto reserve assets recover – namely bitcoin and ethereum. The gains in these two coins eventually stall, followed by a slight pullback in price.
Meanwhile, the shitcoin combo created a massive rally. Then shitcoin rediscovered gravity and capital returned to bitcoin and ethereum. This gradual process continues until the end of the bull market. “
Year-to-date, the total cryptocurrency market capitalization is up about 34%, according to TradingView.
1-day total cryptocurrency market capitalization chart. Source: TradingView
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As reported by Cointelegraph