BitMEX co-founder Arthur Hayes thinks political motives might have driven the recent interest rate cut by the U.S. Federal Reserve and could affect markets and inflation. Hayes suggested that the rate cut, announced on Sept. 18, might be a strategy to boost support for the Democratic Party.
Many investors and analysts expected this decision, which lowered U.S. interest rates by 50 basis points. Hayes believes this could majorly impact both traditional and cryptocurrency markets, with possible long-term effects on inflation and overall economic stability.
He highlighted a mismatch between the rate cut and current economic signals, noting that the US economy is experiencing solid GDP growth and historically low unemployment. He argued that lowering borrowing costs for the government goes against worries about reckless spending.
Hayes on Bitcoin rally and market reactions
Regarding the crypto market’s 4% gain in response to the cuts, he commented, “I think it’s just the calm before the storm,” and suggested we might see a delayed reaction once traditional financial markets close on Friday. Since the Fed’s announcement, the crypto markets have surged by $100 billion. Bitcoin hit a three-week high of $62,500 in early trading on Sept. 19.
In an X post on Sept. 19, Hayes pointed out that attention is now shifting to the Bank of Japan, which is set to announce its rate decision on Friday, Sept. 20. He noted that if the Japanese yen weakens, it could boost Bitcoin’s value. However, he said, a stronger yen and the reversal of yen carry trades might pressure Bitcoin and other asset prices in the short term.
Meanwhile, at a keynote speech during the crypto event in Singapore, Arthur Hayes criticized the Federal Reserve for lowering rates while the US dollar is being issued more and government spending is on the rise. He called it a “colossal mistake.”
Earlier in September, Hayes pointed out that rate cuts wouldn’t benefit crypto because money has shifted from US Treasury bills into higher-yielding reverse repos. Additionally, he predicted a significant Bitcoin crash below $50,000, but that didn’t happen. A few days later, Hayes anticipated a Bitcoin rally after closing and profiting from a short position.
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