The co founders of BitMEX recently stated that if the central bank continues to raise interest rates, the price of Bitcoin ($BTC) may soar.In the latest blog article, Hayes challenged the traditional view of linking Bitcoin prices to interest rates, pointing out that the economic models adopted by central banks and governments are no longer applicable to the current new environment
The co founders of BitMEX recently stated that if the central bank continues to raise interest rates, the price of Bitcoin ($BTC) may soar.
In the latest blog article, Hayes challenged the traditional view of linking Bitcoin prices to interest rates, pointing out that the economic models adopted by central banks and governments are no longer applicable to the current new environment.
In order to control inflation within the target range of 2%, the Federal Reserve and other global central banks have been raising interest rates significantly. The benchmark interest rate of the Federal Reserve has risen from 0.25% to 5.25%, leading to an increase in the yield of treasury bond bonds, which is 5.5% for six-month treasury bond and 4.25% for 10-year treasury bond.
Hayes stated that he is skeptical of the central bank's long-term strategy and believes that inflation may continue to be high. This view stems from the Atlanta Federal Reserve's GDPNow forecast that the nominal GDP growth rate is as high as 9.4%, in sharp contrast to the moderate growth (5%) in the yield of two-year US treasury bond bonds.
Hayes' viewpoint is as follows:
Traditional economics believes that as the Federal Reserve raises interest rates, the growth of credit sensitive economies will slow down. Common sense tells us that in this situation, the nominal GDP growth rate should decrease while the real interest rate should rise. But this did not happen.
According to Hayes' view, the significant decline in financial assets such as Bitcoin and stocks has had a negative impact on the government's capital gains tax, leading to further expansion of the government deficit.
He further pointed out that in order to fill this gap, the government usually needs to continuously issue more bonds, which means that bondholders' interest expenses will rise when interest rates rise.
According to Hayes' hypothesis, if the economy maintains an expansion trend that exceeds the portion of government debt payments, bondholders may seek more attractive "risky assets" such as Bitcoin to pursue higher returns.
The narrative of this shift suggests that lower interest rates may be more advantageous than tokens and other risky assets, as available capital may flow more towards speculative investments. Hayes acknowledges that historically, interest rate declines have often had a positive impact on the valuation of Bitcoin, and marks the correlation between Bitcoin and central bank decisions as a "positive correlation".
EToro CEO Yoni Assia recently revealed that despite a significant decline in the cryptocurrency market, he remains optimistic about the flagship cryptocurrency Bitcoin, whose market value has dropped to about $500 billion. The upcoming halving event of Bitcoin is scheduled to occur in April 2024, triggering many bullish predictions about the price of Bitcoin.
According to reports, investment research firm Fundstrat has stated that the value of Bitcoin may jump by over 500% from its current level to over $180000 before the upcoming halving.
In addition, Standard Chartered Bank, a multinational banking and financial services company headquartered in London, has stated that the price of Bitcoin may rise to $50000 this year and may exceed $120000 by the end of 2024, which is another important bullish price forecast compared to Bitcoin.
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