More Trouble For Crypto Market: Arthur Hayes Predicts Second Wave of Market Crash

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The crypto market has experienced a severe downturn, with many altcoins dropping 20-50% daily, marking the worst decline since the FTX collapse in 2022. This selloff mirrors a broader global market slump, reflecting a significant trading period for equities. The sharp decline in crypto prices underscores its nature as a “risk-on” asset, which tends to plummet quickly during periods of market fear. 

One analyst believes the crypto meltdown is not done, predicting further shocks after 24 hours. 

Hayes’ Prediction of a Second Wave

BitMEX co-founder Arthur Hayes has issued a dire warning, predicting another wave of stock and crypto market crashes due to traders’ highly leveraged positions. Despite a temporary respite, Hayes believes market volatility will continue, leading to further corrections.

Global equity and crypto markets are showing signs of recovery. Japan’s Nikkei has rebounded 10%, and the global crypto and US stock market index futures are rising. However, Arthur Hayes warns this recovery is only temporary. He believes the first wave of market impact has passed, but over-leveraged investors in traditional markets will cause a second wave of corrections. 

If the US Federal Reserve doesn’t intervene with a bailout, the market could suffer more by Friday.

Cathie Wood Reflects on Market Volatility

ARK Invest CEO Cathie Wood compares the current market situation to past crises like Black Monday in 1987 and the Lehman Shock in 2008. She notes that the VIX (Volatility Index) has spiked to its fourth-highest level in 40 years. This is due to disappointing US economic data and higher-than-expected interest rate hikes by the Bank of Japan, which have led investors to sell off assets, causing margin calls.

Moreover, Wood also says the 10-year Treasury bond yield should be around 2%, not the current 3.8% or last October’s 5%. Despite the drop in the US dollar index (DXY) below 103, which encourages Bitcoin buying, uncertainty makes investors cautious.

Potential Market Impact

Meanwhile, the U.S. Treasury Department’s plan to resume Treasury buybacks at $30 billion a month could support the crypto market. Despite Bitcoin rebounding above $55,800, further analysis suggests that if Bitcoin breaches the $50,000 psychological level again, it might revisit the $45,156 key weekly support level.

Investors Stay Alert

In conclusion, Arthur Hayes’ prediction of a second wave of market crashes due to over-leveraged positions in traditional markets, coupled with ongoing economic uncertainties highlighted by Cathie Wood, suggests that market volatility is far from over. 

However, many analysts see this as a positive sign since the market is experiencing an absolute blood bath right now. These minor corrections are very healthy for the market. They help eliminate over-leveraged traders and open up new entry points for investors.

Investors should brace for continued turbulence in both the stock and crypto markets.