Bitcoin Sale Ends and 7 Key Takeaways – Arthur Hayes

In a recent blog post on Medium, former BitMEX CEO Arthur Hayes claims that Bitcoin has likely bottomed out. Hayes claims that the forced sale of Bitcoin by centralized lending institutions and Bitcoin miners is likely to have ended. Those who were required to sell their assets would have already done so. Since the majority of centralized cryptocurrency lenders are currently in the red, they no longer take out loans or collateral to liquidate.

Bitcoin takes a big hit after the FTX disaster

According to Arthur Hayes, Bitcoin’s status as the cryptocurrency’s reserve asset will ensure that it leads the ecosystem out of the shadows. In doing so, he invites investors to focus on Bitcoin’s price activity to determine whether the market has bottomed or not.

According to him, centralized lending and trading organizations, Bitcoin mining and ordinary speculators contributed to the decline of cryptocurrencies, while true crypto believers benefited from the crypto winter. He says no one ever wants to declare bankruptcy, but it can be avoided.

Many in the crypto community have not yet realized how the failure of centralized crypto exchanges affects Bitcoin’s value. Here’s how it all works. Imagine you are a trading company that borrowed money from CEX A; However, CEX A requests a refund within a week and you must comply. As a trading firm, being recalled during a bull market is of little consequence.

There are many CELs that will lend you money so you don’t have to liquidate your current investments. However, when the bull market dissipates and a market-wide credit crunch occurs, CELs often call off their loans at the same time. Without access to additional funding, trading firms must sell their positions to meet capital requirements.

Before the current implosion of the cryptocurrency markets, the largest category of collateralized lending was loans backed by Bitcoin and Bitcoin mining rigs. Therefore, when things start to deteriorate, CELs start dumping Bitcoin, as it is the asset most often used to back loans AND the most liquid cryptocurrency.

Important takeaways

Arthur Hayes addressed the naivety, or perhaps the ignorance, of crypto investors who had no concept of how a CEX works. In the recent bankruptcy filings, the lenders assumed that these trading firms engaged in super-smart arbitrage deals that made them impervious to market volatility.

But that is no longer the case. Now investors are aware that these companies were nothing more than a bunch of degenerates and mere gamblers. The only difference between them and the general population was that they had billions of dollars to play with.

The majority of Bitcoin has been sold by CELs and all major trading firms. The only remaining assets are illiquid shitcoins, private crypto company holdings and locked pre-sale tokens. How a bankruptcy court ultimately deals with these assets is irrelevant to bear market developments. Hayes is confident that these entities do not have extra Bitcoin to sell.

Arthur observes that Bitcoin miners took out loans and when the bear market started, they were forced to liquidate their BTC holdings to pay off the debt. As a result, their Bitcoin holdings have decreased. Glassnode produces an amazing chart showing the net 30-day change in the amount of Bitcoin held by miners.

The following charts analyze how these waves of crypto credit crises affected miners and what they did in response.

Since the beginning of the economic crisis this summer, miners have been net sellers of a significant amount of Bitcoin. They must do so in an effort to keep up with their massive amounts of fiat debt. Even though they have no debt, they still have to pay electricity costs, and because Bitcoin’s price is so low, they have to sell even more of it to keep the plant running. Some miners died or were forced to scale down operations. This is proven by the fluctuations in hashrate.

Arthur Hayes believes that BTC is on the way up again. He reports that the FED’s tightening policy has a lot to do with the top.

I don’t know when or if the Fed will start printing money again. However, I believe the US financial market will become dysfunctional at some point in 2023 due to the Fed’s monetary policy tightening. At that point, I expect the Fed to turn on the printer bank, and then boom shaka-laka – Bitcoin and all other risk assets will go higher.

Arthur Hayes

The crypto market has been in a downward spiral for months, and crypto investors have taken some hits. Recovery is imminent. However, it will be a long and bumpy road before the market is stable.