The outspoken founder of the derivatives exchange BitMEX is updating his crypto outlook amid a brutal market meltdown.
Arthur Hayes believes the bottom is not yet in and forecasts further fallout is incoming after the collapse of the crypto exchange FTX.
Hayes predicts no one can or will bail out FTX, and says it will take years for investors with frozen funds to recover any of their capital.
“If Changpeng Zhao, the richest person in crypto, can’t do the deal – no one can do the deal.
FTX customer deposits will only see recovery in a bankruptcy court, and that will take many years to sort out. Mt. Gox creditors still haven’t received funds and it’s been almost a decade.”
Hayes expects crypto trading platforms and money managers to tighten their policies in the aftermath of the demise of FTX.
“Not your keys, not your coins. Expect all exchanges to guard their clients capital closely. No more taking credit from so called crypto prime brokers. No more polite phone calls to large traders to request a margin top up. No mercy liquidation.
Money managers that lost funds on FTX will retreat from trading initially and reduce the number of trading venues on which they operate. Orderbook liquidity will fall.”
“It won’t take much to push the market to much lower levels and force other over-leveraged players into distress. Remember a lot of liquidity providers will sit on the sidelines licking their wounds for a bit.
If US CPI [inflation data] comes in “hot” [on Thursday] at 7% or 8%, expect TradFi markets to puke into the weekend. Crypto will take another stab lower, and it is possible for a capitulation candle over the weekend when fiat rails are closed.
Crypto OG diamond hands are waiting for lower levels and will step in to further increase their stacks.
Bitcoin (BTC) = $10,000 – $15,000
Ethereum (ETH) = $750 – $1,000
Solana (SOL) = $3
Assume that until proven otherwise all counterparties have or had exposure to one of SBF’s enterprises. That means if you don’t believe they are being honest about their losses due to word salad statements that don’t actually say much. GTFO!”
Hayes is looking to the Federal Reserve to reduce interest rates next year, paving the way for the next crypto upturn.
“I have been trading crypto for longer than I have been trading TradFi, and I am still speechless about what is going down.
The faster we take our losses, the faster we bottom and set ourselves up for the Fed pivot which will happen sometime in 2023. The worst would be for zombies to still be amongst us when yield curve control begins in earnest.
So long for now but chin up, the band is still playing, and there is money to be made in both directions.”