BitMEX co-founder Arthur Hayes has offered some interesting insights into the potential impact of the US Federal Reserve’s (Fed) interest rate cut on risk assets, including cryptocurrencies. He warned that the upcoming rate cut could lead to a significant decline in these assets immediately following the announcement, despite history showing that interest rate cuts are generally beneficial for Bitcoin.
According to Hayes, cutting interest rates in the current inflationary environment is unwise. He points out that US government policies are contributing to rising price pressures, and that lowering borrowing costs could exacerbate inflation. Additionally, he notes that a rate cut would narrow the interest rate differential between the US and Japan, leading to a sharp appreciation of the yen and potentially triggering a flight from yen borrowing – as investors borrow in yen to invest in higher-yielding assets. He points out that this could cause major market volatility, as seen with Bitcoin’s fall from $64,000 to $50,000 in August.
The BitMEX co-founder predicts that interest rates in the United States could return to near zero. He believes that the initial market reaction to the rate cut will be negative, leading to the possibility that the Fed will XEM further cuts to deal with emerging crises. In that context, Hayes sees opportunities in yielding assets, especially Ethereum (ETH), which currently offers a Staking yield of around 4%. Other yield-generating products in the crypto space, such as Ethereum 's USDe and Pendle 's BTC Staking , could also benefit from lower interest rates.
Furthermore, Hayes agrees with the view of market strategist Russel Napier, who argues that central banks are becoming less important as governments take control of liquidation creation to manage debt-to-GDP ratios. Hayes sees this as a positive development for the crypto market, emphasizing that cryptocurrencies are uniquely positioned as portable assets that help investors navigate a changing economic landscape characterized by targeted liquidation measures and Capital controls.
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According to Coindesk
