Bitcoin’s $18k Level Probably Constitutes a Bottom and Will be Retested, says Bitmex’s Hayes

Arthur Hayes, chief executive officer of BitMEX, speaks during the Consensus: Invest event in New York, U.S., on Tuesday, Nov. 28, 2017. Consensus: Invest, the world's first digital asset investor outlook event hosted by CoinDesk, brings institutional investors, hedge funds, money managers, banks, and family offices together to get connected with how to invest, store, trade and judge value in this new asset class. Photographer: Michael Nagle/Bloomberg

Summary:

• Arthur Hayes has forecasted that Bitcoin’s most recent low, around $18k, could constitute a bottom.
• According to his analysis, a classic bottom is usually tested before a bull market begins, and $18k is no different.
• He sees the rally from $18k levels to $24k as a potential ‘short covering.’
• He anticipates a proper Bitcoin bottom before the US Fed or Treasury announces a policy change.

Bitmex’s founder and former CEO, Arthur Hayes, has forecasted that Bitcoin’s most recent lows around the $18k price area probably constitute a bottom.

According to his analysis, a Bitcoin bottom is usually retested before a proper bull market begins. Therefore, Bitcoin’s current move from $18k to $24k could just be a investors ‘short-covering.’ He explained:

Some of you savvy readers might have bottom ticked the market by buying Bitcoin below $18,000. That level will probably constitute the bottom; however, a bottom is usually tested again before the bull market begins in earnest.

Bear market rallies are viscous in their ability to force short covering. I don’t believe this rally from $18,000 to almost $24,000 is any different.

Bitcoin Will Bottom Before the US Treasury or Fed Changes its Policy.

Mr. Hayes also anticipates that a Bitcoin bottom will probably occur before a change in policy by the US Treasury or Federal Reserve. He, however, cautioned that he had no idea when such a policy change would happen and pointed out that he, too, was waiting on the sidelines. He added:

But, however sound my arguments may be, I have no idea what the timing of such an announcement will be. That is why, for my portfolio at least, it pays to wait.

I am in no rush to sell fiat and increase the weighting of crypto in my overall portfolio. I will wait for a declarative statement from one of these two government agencies that supports my hypothesis.

If the US Fed is Ready to Fight Inflation, it Will Increase Interest Rates to 9%.

Furthermore, Mr. Hayes observed that the US Federal Reserve and other global central banks were not that much concerned about fighting inflation. He suggested that these central bankers ought ‘to raise the short-term rates to match inflation levels.’ He mused:

Imagine if the Fed raised rates to 9%, which is about the level of the latest CPI print. It likely would stop many components of inflation in their tracks, albeit at the expense of the ruling class (aka asset holders).

If the Fed is really prepared to do the unspeakable to fight inflation, then they should do it already! Otherwise, this inflation-inspired Kabuki theatre is getting quite boring.