The former CEO of crypto derivatives platform BitMEX, Arthur Hayes, thinks that this cycle could be the worst for bitcoin (BTC), as the “biggest and most irresponsible entities” have reduced BTC stock which they had for sale.
“If we look to the future, almost everyone who could go bankrupt has already gone bankrupt,” he said in a Dec. 11 interview with cryptocurrency advocate and podcaster Scott Melker.
In developing his thesis, Hayes explains that when centralized lending companies (CELs) have liquidity problems, they first resort to borrowing. Then, he continues, they sell their BTC first because the cryptocurrency is positioned as “the reserve crypto asset” and “the most valuable and liquid asset”.
“When you look at the balance sheet of one of these heroes, you notice that they have no bitcoins, because what are they doing? They sold their bitcoins when they were going bankrupt, they sold their bitcoins during the wave that preceded their bankruptcy. »
Hayes shared a similar argument in a Dec. 10 blog post. He explained that while this “credit crunch is going on” there have been significant sales of BTC on exchanges, from CELs looking to avoid bankruptcy and trading firms that suffered loan calls and had to liquidate their positions.
Let’s try this again.
—Arthur Hayes (@CryptoHayes) December 9, 2022
Let’s try one more time. In “PEMDAS” I argue that $BTC has taken off, and then I talk about what kind of #cryptocurrencies I’ll be holding while I wait for the printing press to start again.https://t.co/JNAQ7VK0Ec pic twitter.com /IV4Td1UTda — Arthur Hayes (@CryptoHayes) December 9, 2022
“That’s why bitcoin price crashes before CELs go bankrupt. This is the big move. “, he said.
“I can’t prove to show that all the bitcoin held by these bankrupt institutions were sold during the ongoing crashes, but it seems to me that they did their best to liquidate the most liquid crypto collateral they could, just before going bankrupt. »
Adding to his thinking, however, Hayes thinks the large-scale liquidations are over. He explains in the blog post “There’s no reason to hang on if fiat was really needed. »
Also read: Hong Kong could be the key to bring back cryptocurrencies in China according to Arthur Hayes!
After the fall of crypto exchange FTX, and the subsequent fallout, the market is still very much in the grip of crypto winter. However, Hayes believes the market could see some recovery in 2023.
“I think the US Treasury market will become dysfunctional at some point in 2023 due to Fed tightening monetary policies,” he said, before adding: “At that point, I expect that the Fed will turn on the money printing machine, and then boom shaka-laka – bitcoin and all the other risky assets will soar. »