In a recent blog post, Arthur Hayes, the former CEO of BitMEX, issued a warning regarding the potential for a significant Bitcoin (BTC) price crash in March.
While many Bitcoin enthusiasts are optimistic about the year ahead, Hayes believes that there are factors at play that could lead to a sharp correction.
March financial turmoil and Its potential impact on Bitcoin
Hayes predicts a week of turmoil in financial markets in March, primarily driven by events related to the U.S. Federal Reserve and its efforts to stabilize the economy. Specifically, he points to the expiration of the Bank Term Funding Program (BTFP) on March 12th and the Federal Open Market Committee (FOMC) decision on interest rates, set to be announced on March 20th.
According to Hayes, the market may bankrupt some banks in the six trading days between these two crucial events, forcing the Fed to cut rates and resume the BTFP. This anticipated volatility in the banking sector could have a cascading effect on Bitcoin and the broader crypto market.
Bitcoin’s response to economic uncertainty
Bitcoin and other cryptocurrencies have proven to be highly sensitive to changes in macroeconomic liquidity. In the event of a Fed bailout, the crypto market could benefit without experiencing an initial shock reminiscent of the 2023 banking crisis.
Hayes notes that Bitcoin tends to decline sharply along with broader financial markets during times of uncertainty but often rebounds before the Fed meeting. This is because Bitcoin is viewed as a neutral reserve hard currency not tied to the banking system and traded globally. Hayes suggests that Bitcoin anticipates the Fed’s response of injecting liquidity during crises, ultimately driving its recovery.
He emphasizes that Bitcoin understands that printed money, in any form, is still printed money, and this realization causes Bitcoin to rise sharply before the Fed resorts to restarting its money printing presses.
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