Bitcoin’s price has dropped around 20% from its peak of nearly $49,000 in mid-January, sparking fierce debate around the factors driving the decline and speculation on where the price may head next.
- Arthur Hayes argues that outflows from Grayscale’s Bitcoin Trust are not the main reason behind Bitcoin’s recent price decline. Instead, he points to macroeconomic factors like monetary policy shifts.
- Hayes believes Bitcoin’s decline correlates with fluctuations in the yield of the 2-year US Treasury, suggesting an economic interplay.
- He predicts a potential “mini financial crisis” when the Bank Term Funding Program expires on March 12th, which could prompt Fed rate cuts and quantitative easing.
- Hayes bought put options with a $35,000 strike price, expecting Bitcoin to find support between $30,000-35,000.
- Samson Mow believes investors waiting for Bitcoin to drop below $30k will be “disappointed.” He sees potential for significant upside following the upcoming halving.
In a contrarian take, crypto pioneer Arthur Hayes argues that outflows from Grayscale’s Bitcoin Trust are not actually the catalyst behind Bitcoin’s retreat. Analyzing net inflows into newly-approved Bitcoin spot ETFs against Grayscale outflows reveals over $800 million entering the market, not exiting.
Instead, Hayes correlates Bitcoin’s decline with shifts in macroeconomic policies and indicators. He points to recent volatility in the yield on 2-year US Treasuries, suggesting interdependence between Bitcoin and broader economic undercurrents emerging from monetary policy maneuvers.
Specifically, Hayes spotlights the upcoming March expiration of the Bank Term Funding Program (BTFP), created to support smaller regional banks through the turmoil of 2023. With the program ending amidst still-precarious financial positions, Hayes sees crisis looming. He believes only an actual crisis prompting urgent Fed rate cuts and quantitative easing will prevent bank failures when BTFP expires.
Bracing for fresh economic headwinds, Hayes purchased put options allowing him to sell Bitcoin at $35,000 in March 2024. He expects Bitcoin to plunge 30% from January’s peak, finding support between $30,000-35,000 before eventually rebounding.
Other experts paint a very different picture. Samson Mow, CEO of Pixelmatic, claims many investors await a sub-$30k Bitcoin price entry point which will never materialize. He sees smooth sailing ahead, with the upcoming Bitcoin halving in April likely catalyzing the next leg up.
From what I'm hearing, a good amount of investors are thinking #Bitcoin will drop to the low $0.03M range and waiting to buy then. I think they'll be disappointed.
— Samson Mow (@Excellion) January 22, 2024
So who to believe? Bitcoin has weathered multiple boom and bust cycles since its inception, often rocketing to dizzying new heights after prolonged bear markets. With macroeconomic uncertainty layered on top of Bitcoin’s already legendary volatility, anything could happen in the months ahead.
One thing both sides agree on is Bitcoin’s uniqueness as an open, transparent, decentralized monetary system and store of value. As global tensions rise, shipping costs surge, inflation persists and central banks pull every monetary policy lever at their disposal, Bitcoin stands poised as a potential hedge against the unknown road ahead.