Former Bitmex Chief Predicts 30% BTC Correction — Warns Spot Bitcoin ETFs Could Make It Worse
Former Bitmex CEO Arthur Hayes is cautioning about a potential 30% correction in the bitcoin market. “The washout could be even more severe if the slate of U.S.-listed spot bitcoin ETFs has already commenced trading,” he warned. “I could easily see a 30% to 40% correction due to a dollar liquidity rug pull.”
Ex-Bitmex Chief’s Bitcoin Predictions
Former Bitmex CEO Arthur Hayes outlined his bitcoin price forecast in a Medium post published last week. He also discussed the impact of spot bitcoin exchange-traded funds (ETFs) on the price of bitcoin. The U.S. Securities and Exchange Commission (SEC) is expected to approve multiple spot bitcoin ETFs early next week.
Noting that he expects three variables to “collide with each other in March,” the former Bitmex boss predicts:
I expect bitcoin to experience a healthy 20% to 30% correction from whatever level it has attained by early March. The washout could be even more severe if the slate of U.S.-listed spot bitcoin ETFs has already commenced trading.
The first variable is the Fed’s Reverse Repurchase Operations (RRPs) or revere repo. Hayes expects the RRP balance to hit $200 billion in early March. Noting that the market will then “wonder what is next,” he emphasized: “There needs to be another source of dollar liquidity supplied to keep the party going.” Secondly, he said that on March 12, “the broke banks must find the cash to swap with the U.S. Treasuries and other eligible bonds they repo’d with the Fed.” Another factor concerns whether the Fed will cut interest rates at the Federal Open Market Committee (FOMC) meeting on March 20. He opined: “Currently, the market expects the Fed to initiate its first rate cut of at least 0.25% since it started raising rates in March of 2021.”
As for spot bitcoin ETFs, Hayes described: “Imagine if the anticipation of hundreds of billions of fiat flowing into these ETFs at a future date propels bitcoin above $60,000 and close to its 2021 all-time high of $70,000. I could easily see a 30% to 40% correction due to a dollar liquidity rug pull.” Proposals to list and trade 11 spot bitcoin ETFs have been filed with the SEC, and trading could start as soon as Jan. 11.
“As many of you know, I have a diverse crypto portfolio. My biggest positions are bitcoin and ether, representing ~70% of my portfolio. The other shitcoins I own are much less liquid, and in particular, the liquidity of the derivatives on these shitcoins is poor. Therefore, if I want a liquid macro crypto hedge, I must use bitcoin derivatives,” he shared. The former Bitmex executive concluded:
If my forecasts are correct, the market will start meaningfully correcting around March 12th.