Arthur Hayes says that there could be a drop in reward halving time

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The crypto market faces the U.S. tax season liquidity test around the time the Bitcoin blockchain implements the fourth mining-reward halving on April 20.
U.S. tax payments could suck dollar liquidity from the financial system, fueling risk aversion and a fire sale of risk assets, Hayes said.
Gear up for some pain in the digital assets market.
That’s the message from Arthur Hayes, a co-founder and former CEO of crypto exchange BitMEX and the chief investment officer at Maelstrom.
In his latest blog post, “Heatwave,” Hayes explained that the bullish halving narrative is “well entrenched,” leaving the doors open for a so-called price correction.
“The narrative of the halving being positive for crypto prices is well entrenched,” Hayes wrote.
That is why I believe Bitcoin and crypto prices in general will slump around the halving.”
I expect the TGA balance to swell well above the current ~$750 billion level as tax payments are processed on April 15th.

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The cryptocurrency market confronts the U.S. S. tax season liquidity test on April 20, the day the fourth mining-reward halving is implemented on the Bitcoin blockchain.

by Godbole Omkar.

9 April, 2024, 8:18 a.m. M. UTC.

As the halving’s purportedly bullish effect has become ingrained, Hayes stated in a blog post that Bitcoin may experience selling pressure in the second half of April.

U. s. As a result of tax payments, the financial system may lose dollar liquidity, which would increase risk aversion and lead to a fire sale of risky assets.

In the market for digital assets, be prepared for some pain.

With the mining-reward halving scheduled for April 20, an event that is expected to be bullish, selling pressure on Bitcoin (BTC), the largest cryptocurrency by market value, is likely to increase.

Chief investment officer at Maelstrom and co-founder of BitMEX, a cryptocurrency exchange, Arthur Hayes conveys this message.

Hayes explained that the bullish halving narrative is “well entrenched,” leaving the door open for a purported price correction in his most recent blog post, “Heatwave.”. When it comes to cryptocurrency, a correction is defined as a price decline of at least 10%.

The narrative that is bullish is based on data that indicates bitcoin has a tendency to exhibit spectacular multimonth rallies in the months following the halving, which lowers the rate of supply expansion by 50% every four years. This time, the halving will reduce the issuance of each block from 6.25 BTC to 3.125 BTC.

It’s a widely accepted narrative that the halving will boost cryptocurrency prices, according to Hayes. It usually happens the other way around when the majority of market participants concur on a particular result. I think the price of Bitcoin and cryptocurrencies in general will drop around the halving because of this. “.”.

Numerous analysts have contended that the market may correct after the event because the supply slowdown is already priced in. Prior to the halving, Bitcoin had already increased by more than 65% this year and had broken previous records above $70,000.

Taxes to drain available funds.

Hayes stated that the U. S. Due on April 15, tax payments and the Federal Reserve’s quantitative tightening (QT) policies may cause the market to lose dollar liquidity, which would cause widespread risk aversion and a fire sale of cryptocurrency assets around halving.

The halving will fuel a ferocious firesale of cryptocurrency assets because it takes place at a time when dollar liquidity is tighter than usual. The timing of the halving strengthens my resolve to hold off on trading until May,” Hayes stated.

When people take money out of market funds and bank accounts to pay their taxes, tax payments usually drain liquidity from the financial system.

Borrowers with loans denominated in dollars incur higher interest costs and reduce their exposure to riskier assets like technology stocks and cryptocurrencies when the dollar’s liquidity evaporates, making it more valuable relative to other fiat currencies. The opposite is true when the dollar depreciates. The U.S. S. Global trade, non-bank borrowing, and international debt are significantly influenced by the dollar, which serves as a global reserve currency.

Thanks to capital gains from the booming stock markets and interest income from higher interest rates, liquidity outflows owing to upcoming tax payments could be sizable. Stated differently, there will be a significant increase in the Treasury General Account (TGA) balance during the latter part of April. The TGA is the government’s operating account that is kept up to date at the Fed in order to pay for government expenses and to collect tax revenue, customs duties, proceeds from the sale of securities, and debt receipts.

“Treasury gains when tax payments are received by the Treasury.”. With the processing of tax payments on April 15th, I anticipate that the TGA balance will rise significantly above its current level of approximately $750 billion. Dollar liquidity is negatively impacted,” Hayes stated. For risky assets, the precarious period runs from April 15 to May 1. “.

For risk assets in the months preceding the U.S. election, Hayes anticipates Treasury Secretary Janet Yellen to run down the Treasury General Account after May 1. S. November brings a presidential election.

“Yellen gets busy cashing checks to drive up asset prices after May 1st, when the pace of QT slows down. April is a great month to take a bold short position if you’re a trader looking for the right moment to do so. After May 1st, regular programming will resume, featuring asset inflation supported by the Fed and the U.S. S. Treasury financial manipulations,” Hayes penned.

By Sheldon Reback, editor.

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