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The ex-BitMEX CEO announces a BTC deployment "over the coming days" amid hope that the good times will last for crypto until the middle of the year.
Bitcoin (BTC), Ether (ETH) and even nascent altcoins are a solid “buy,” a previously risk-off investor says.
In a blog post released Feb. 8, industry stalwart Arthur Hayes announced a U-turn on his current crypto investment plans.
Current macroeconomic conditions stemming from the United States Federal Reserve previously made Arthur Hayes keen to avoid what he calls “risky assets.”
As inflation slows and the Fed’s rate hikes with them, multiple new storms are brewing in the U.S., and the Fed, as well as Congress and the Treasury, will all steer the economy as they see fit, he says.
The problem is guessing how these events will play out over the course of the year. For Hayes, 2023 could well be split into two halves, with H1 being an ideal investment environment for crypto.
This runs contrary to a previous thesis from mid-January, in which the former BitMEX CEO said that he was staying on the sidelines for fear of a Fed-induced capitulation event hitting risk assets.
“My concerns about this potential outcome, which I handicapped would most likely happen later in 2023, has led me to keep my spare capital in money market funds and short-dated US Treasury bills,” he now explained.
“As such, the portion of my liquid capital that I intend to eventually use to purchase crypto is missing out on the current monster rally we’re seeing off of the local lows. Bitcoin has rallied close to 50% from the $16,000 lows we saw around the FTX fallout.”
Hayes continued that Bitcoin is likely far from done with its rebound despite 40% gains in January alone, comparing the risk asset environment to that of 2009 and the start of quantitative easing (QE).
This year, the picture is complex — QE has given way to quantitative tightening (QT), where liquidity is removed from the U.S. financial system at risk assets’ expense.
H1, however, looks to be providing some relief — until Congress votes to raise the debt ceiling in Summer, which Hayes and others argue is inevitable, some liquidity is actually returning to avoid the debt ceiling hitting too soon.
Cash in the Treasury General Account (TGA) will be emptied to the tune of $500 billion, canceling the $100 billion monthly in liquidity that the Fed is removing.
“The TGA will be exhausted sometime in the middle of the year. Immediately following its exhaustion, there will be a political circus in the US around raising the debt limit,” the blog post forecast.
“Given that the Western-led fiat financial system would collapse overnight if the US government decided to forgo raising the debt ceiling and instead defaulted on the assets that underpin said system, it’s safe to assume the debt ceiling will be raised.”
It is then that the tide will turn, and risk assets could become a thorn in the side of every investor once again.
Related: BTC price metric that cued biggest Bitcoin bull runs breaks out at $23K
It is all a matter of timing, Hayes believes. His plan is to move into U.S. dollar cash, from where a segue into select risk assets is possible. Top of the menu, it would appear, is Bitcoin.
“I’ll deploy over the coming days. I wish my size actually mattered, but it doesn’t — so please don’t think that when this happens, it will have any discernible effect on the price of the orange coin,” he told readers.
Going forward, however, altcoins represent a major opportunity, the blog post explains in its conclusion, with these likewise conditioned by timing.
“The key to shitcoining is understanding they go up and down in waves. First the crypto reserve assets rally — that is, Bitcoin and Ether. The rally in these stalwarts eventually stalls, and then prices fall slightly,” Hayes wrote about crypto market cycles.
“At the same time, the shitcoin complex stages an aggressive rally. Then shitcoins rediscover gravity, and interest shifts back to Bitcoin and Ether. And this stair-stepping process continues until the secular bull market ends.”
Year-to-date, the total crypto market cap has gained around 34%, data from Cointelegraph Markets Pro and TradingView shows.
Guiding the process in 2023, then, is the “unwinding” of the brief window of more accommodative economic conditions currently revealing itself in the U.S.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
$117 million heads into crypto investment products in a single week, and the vast majority went straight into Bitcoin.
Bitcoin (BTC) rebounding 40% in January sparked the largest inflows of institutional cash since June 2022, data shows.
In its "Digital Asset Fund Flows" Weekly" report on Jan. 30, digital asset investment and trading group CoinShares confirmed $117 million headed into crypto in the last week of the month.
Bitcoin is still on the radar as an institutional investment opportunity.
As demonstrated by CoinShares’ latest data, it took a matter of weeks of BTC price action recouping prior losses to spark a major turnaround in investment habits — and not just in the United States.
“Last week's US bears seem to have changed their mind with US$117m inflows, including US$26m from the United States,” CoinShares wrote in a Twitter thread accompanying the report.
“This is 3x the amount from last week. Total AuM had risen to US$28bn, up 43% from their November 2022 lows.”
Germany was the surprise leader, responsible for 40% of the week’s tally, followed by Canada.
Despite altcoins rallying in line with Bitcoin, however, institutions appear mainly interested in BTC when it comes to cash.
In the words of CoinShares, “the focus was almost entirely on Bitcoin,” a fact not lost on market participants eyeing a potential shift in preferences away from the Ethereum-centric DeFi arena.
“This is evidence that institutional money isn't sold on the Ethereum thesis,” popular Twitter account Pillage Capital argued.
The numbers likewise belied testing times for certain altcoins, with CoinShares singling out Bitcoin Cash (BCH), Stellar (XLM) and Uniswap (UNI). Solana (SOL), Cardano (ADA) and Polygon (MATIC) nonetheless saw net inflows.
“Multi-asset investment products saw outflows for the 9th consecutive week totaling US$6.4m, suggesting investors are preferring select investments,” it commented.
After staging a marked comeback of it own, meanwhile, the largest Bitcoin institutional investment vehicle seems to be running out of steam once more.
Related: Bitcoin sees golden cross which last hit 2 months before all-time high
The Grayscale Bitcoin Trust (GBTC) traded at a 43% discount to Bitcoin spot price on Feb. 7, having recovered to 36.2% in mid-January.
As Cointelegraph continues to report, Grayscale currently finds itself caught up in difficulties impacting parent company Digital Currency Group following the disintegration of FTX in November.
Even before that, however, GBTC was struggling, as Grayscale attempts to force U.S. regulators to allow it to convert it to the country's first Bitcoin spot price exchange-traded fund (ETF).
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.