Bitcoin Price Crash in March: BTC Price At Risk Of Dropping Nearly 40%, Warns BitMEX Founder

The post Bitcoin Price Crash in March: BTC Price At Risk Of Dropping Nearly 40%, Warns BitMEX Founder appeared first on Coinpedia Fintech News

Recently, the cryptocurrency market has been experiencing some major ups and downs due to the anticipation of the spot bitcoin ETF. The confidence among the investors was on the rise, but a sudden report by Matrixport shook the market and resulted in a drop of 6% and 600 million liquidations in just 24 hours.

However, Arthur Hayes, founder of BitMEX, explained that the current bull market is still in its early stages, and investors must remain vigilant and adjust their trading strategies accordingly.

In this article, we will explore Hayes’s insights on the market and his predictions for its future.

Liquidity and its Impact on the Market

Hayes has closely discussed the importance of liquidity and its impact on the market. He explained that as the Reverse Repo Programme (RRP) balance declines, it will trigger a decline in the RRP balance, adding liquidity to the system. This has been observed in recent months, as both the bond and stock markets have rallied due to the increase in supply and higher yields on the Treasury.

Fed decisions and their impact on the market

Hayes cautioned that if the RRP balance declines close to zero by early March, it could lead to a decline in both bonds and stocks. This is because there needs to be another source of dollar liquidity supplied to keep the party going. He suggested that the Fed’s March meeting could provide some insight into this issue, as they are expected to initiate their first rate cut since 2021. 

Hayes also discussed the impact of the expiration of two programs on March 12th: the Term Asset-Backed Securities Loan Facility (TALF) and the Money Market Mutual Fund Liquidity Facility (MMLF). He predicted that these programs’ expiration could lead to a few non-TBTF banks becoming insolvent, forcing the Fed to cut rates and announcing a renewal of the Backstop Term Funding Program (BTFP). This would provide a lifeline to insolvent banking institutions and prevent further market turmoil. 

Buying Put Options on Bitcoin

Regarding trading strategy, Hayes suggested buying put options on Bitcoin around this time due to potential market volatility. He expects Bitcoin to experience a healthy correction from its current level by early March, with a possible 30% to 40% gain if hundreds of billions of dollars flow into US-listed spot Bitcoin ETFs. However, he cautioned against buying Bitcoin until after these decision dates have passed due to potential dollar liquidity rug pulls.

He later claimed that China’s Taiwan elections and Japan’s Bank of Japan (BOJ) slowly allowed Japanese government bond (JGB) yields to rise. Both scenarios could lead to further market volatility and potentially impact the crypto market.

Overall, Hayes’ analysis emphasizes the significance of staying informed about market outcomes and adjusting trading strategies accordingly. He stated, “We must stay vigilant and place our chips accordingly.” By following his insights into liquidity, Fed decisions, and potential curveballs, investors can make informed decisions about their trading strategies in this volatile market environment.