Arthur Hayes Predicts 30% Drop in Bitcoin: The Reasons behind the 'Vicious Washout'

• Potential Market Crash in March May Decrease Bitcoin Value, Arthur Hayes Predicts
• Possible Trigger by Depletion of the Fed's Reverse Repo Program and Expiry of Bank Funding Facility
• Speculations on Bitcoin ETF Decision Distract Crypto Investors
• Hayes' Predictions and Preparations for the Future
• Impact of the Federal Reserve's Reverse Repo Program
• Expiration of the Bank Term Funding Program
• Predictions for Bitcoin's Price

Potential Market Crash in March May Decrease Bitcoin Value, Arthur Hayes Predicts

Possible Trigger by Depletion of the Fed's Reverse Repo Program and Expiry of Bank Funding Facility

There could be a possible market crash in March due to the depletion of the Fed's reverse repo program and the expiry of a critical funding facility for troubled banks. This crash may force the Federal Reserve to cut interest rates, according to Arthur Hayes, the CIO at Maelstrom. Hayes forecasts that Bitcoin$42,260 -0.64% could experience a 20% to 30% decline in this rout, but it might rebound quickly.

Speculations on Bitcoin ETF Decision Distract Crypto Investors

While some crypto investors are focused on the possible approval of a spot bitcoin exchange-traded fund (ETF) that could boost BTC's price, Hayes warns that there could be a significant drop of around 20-30% in the coming months. Hayes has outlined the risks for U.S. banks and markets which are likely to collide in March, leading to a significant liquidity event similar to the banking crisis that happened last year.

Hayes' Predictions and Preparations for the Future

In his recent blog post, Hayes mentions his preparations for a major washout event in the crypto market, scheduled for March this year. He states that he has heavily invested in crypto in the second half of 2023 and believes the period from now until April is a non-trade zone concerning risk.

Impact of the Federal Reserve's Reverse Repo Program

The Federal Reserve's reverse repo program (RRP), where qualified banks and investment firms can park cash and earn interest on it, provided a boost for risky assets last year by injecting capital into markets. However, the RRP balance is declining quickly, and Hayes predicts it will reach its average historical value of $200 billion by March.

Expiration of the Bank Term Funding Program

The Bank Term Funding Program (BTFP), a crucial Fed facility that helped avert last year's regional banking crisis, is set to expire on March 12. This expiration could cause instability in the banking system. The BTFP provided banks with funding to fulfill deposit withdrawals by lending them money based on their U.S. government bond holdings. Hayes believes that this facility will not be extended, which could lead to bankruptcy for banks with significant unrealized losses on their bond holdings.

Predictions for Bitcoin's Price

Hayes suggests that if his predictions come true, Bitcoin's price will likely decrease 20% to 30% from its early March prices. Hayes also predicts that Bitcoin's price will initially decrease sharply with the broader financial markets but will rebound before the Fed meeting. Several crypto analysts have recently forecasted a correction for crypto markets.

Edited by Jonathan Stoker