With the Fed’s rate hike around the corner, the Bitcoin price could rise again
- BitMEX founder Arthur Hayes believes troubled US banks will not survive the bank failure unless the US Federal Reserve cuts interest rates.
- Hayes argues against the US central bank’s expected rate hike of 25 basis points.
- Bitcoin prices climbed on Tuesday amid fears of US bank failures and a sell-off in US stocks.
Arthur Hayes, crypto influencer and analyst told his 377,000 followers on Twitter that he is shorting US bank-related stocks. The expert’s opinion is that the central bank must cut interest rates to deal with the banking crisis, and interest rate increases reinforce the emerging financial problems of the banks in the United States.
On the back of bank failures and the decline in US stocks, the Bitcoin price rose on Tuesday, climbing above $28,600.
Also read: Bitcoin calculations hit an all-time high ahead of the US Federal Reserve’s interest rate decision
Arthur Hayes is shorting US bank stocks for this reason
Hayes is a crypto influencer and BitMEX founder. The former BitMEX CEO recently shared his position on US banking stocks in a tweet. Hayes explained that the looming US banking crisis needs the US central bank, the Federal Reserve, to change its stance.
The expert sees interest rate cuts as a viable solution to the financial woes of US banks, and condemns the US Federal Reserve’s expected 25 basis point (25 bps) hike on May 3.
A few of these banks will not be with us next Monday. Unless the Fed cuts interest rates and signals more cuts, or #bank term financing program qualified collateral is extended to any loan on a US federally chartered bank’s balance sheet, it’s goblin town!
I got a few putts last night. Yachtzee! pic.twitter.com/Ahe0fLqQ7C
— Arthur Hayes (@CryptoHayes) 2 May 2023
In his recent tweet, Hayes explains that a few of the US banks facing similar problems as the FRC may not be around anytime soon. Unless the US Federal Reserve cuts interest rates, US banking problems may persist.
Hayes has consistently shared his opinion on the US banking crisis, criticizing banks that have commercial real estate (CRE) loans on their balance sheets.
A CRE is a loan made to individuals or entities for the acquisition, development and construction (ADC) and financing of income-producing property. Based on a report titled “Commercial Real Estate Loan Origination at Failed US Banks,” authored by Andrew Felton and Joseph B Nichols, “CRE loan exposure at regional and small US banks and thrifts has increased over the past two decades.”
As these loans become concentrated on banks’ balance sheets, these institutions become more sensitive to fluctuations in CRE prices.
From Hayes’ list of banks, First Republic Bank and Signature Bank emerged as victims of financial problems. The other central US banks on the list include Wells Fargo and Company, JP Morgan Chase & Co. and Bank of America.
The US central bank is expected to raise interest rates by 25 bps on 3 May. Hayes has criticized the central bank’s move, citing that interest rate increases fuel the financial crisis in the banking ecosystem and called for “interest rate cuts” instead.
Hayes’ thesis is that interest rate hikes will exacerbate the US banking crisis, causing more banks to close their doors for business due to their looming financial problems. The BitMEX founder claims that the banks highlighted as “TBTF” on his list have a government guarantee on their deposits. However, “other banks on the list may suffer as long as inflation is stuck at these high levels and possibly rising.”
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If you are not one of the 8 TBTF banks, you are screwed as long as inflation is stuck at these high levels and possibly rising. Today, I would pick a bank with large CRE exposure and 50% to 75% OTM places expiring before June 1st.— Arthur Hayes (@CryptoHayes) 1 May 2023
Bitcoin price rises as US stocks fall, shift in loyalties
Interestingly, for most of 2022, there was a deep correlation between Bitcoin and US stocks. The banking crisis highlighted by Arthur Hayes has driven the two apart and given rise to an “inflation hedge” narrative, where capital rotates into BTC when US stocks suffer a fall in prices.
The failure of several US banks could continue to fuel the “Bitcoin is an inflation hedge” thesis and drive capital rotation into the risky asset sector, typically seen since early 2023.
Bitcoin price rallied nearly 3% since Tuesday, climbing above $28,600 on news of troubled US banks and their deepening problems.
Experts set a bullish breakout target of $35,000 for the Bitcoin price. Adrian Zduńczyk, CMT, crypto expert and trader set a technical breakout target at $35,500 despite the fluctuations on the Bitcoin price chart.
BTC/USD 1D price chart
After crossing cluster resistance at $28,500, Bitcoin price is on course to challenge the 2021 lows of $30,000 in the run-up to the breakout target of $35,500. The expert’s thesis remains valid if there is bullish momentum to sustain a sustained trend change.
