- Arthur Hayes says that the expiry of the US Fed’s Bank Term Funding Program in March will bankrupt a few banks and lead to the Fed cutting rates to boost these banks.
- This will lead to a Bitcoin slump just before the halving, with Hayes saying that while a 20% correction could be healthy in the long term, he foresees a dip of up to 40%.
A spot ETF in January and the halving three months later; this looks like the year of Bitcoin to set new highs. However, according to one of the crypto industry’s most renowned thought leaders, Arthur Hayes, BTC investors should brace themselves for a dip of up to 40% in March due to macroeconomic factors.
In a recent blog post, Hayes outlined three key reasons why March will be an important month for Bitcoin. One key reason is the Bank Term Funding Program (BTFP), which was set up after the banking crisis of 2023. It allows banks to borrow funds from the Fed for up to one year while pledging agency debt and US treasuries as collateral. BTFPs have hit record highs in the past week.
This program ends on March 12, and the banks that have been relying on it will have to find new funding ways.
The Fed has a meeting on March 20, in which experts expect it to cut rates for the first time since 2021. Adding to the significance of March, Hayes expects the Reverse Repo Program (RRP) balance to decline significantly to around $200 billion. RRPs are sales of securities by financial institutions under the agreement to repurchase them at a higher price at a future date.
Hayes Explains What Happens to Bitcoin in March
All these events will have a significant effect on the price of Bitcoin. The BTFP, for instance, will determine the survival of several US banks that, until now, have been surviving on this program. If, as most experts expect, Treasury Secretary Janet Yellen fails to renew this program, some banks will face receivership.
This will force Yellen to renew the program, but since there won’t be enough printed money to cover the bond losses from the major “too big to fail” banks like JPMorgan, Citi and Bank of America, the US financial market will collapse. Crypto, and every other type of asset, will take a nosedive.
RRP will also affect Bitcoin, as tradeable assets always take a hit without any other source of dollar liquidity.
Then, there is the March 20 Fed rate meeting. If the BTFP forces some banks to their knees, the Fed will be forced to cut rates. This will be a blow for Bitcoin and other assets, but according to Hayes, holding BTC will be the best way out.
“That is because Bitcoin is the only neutral reserve hard currency that is not a liability of the banking system and is traded globally. Bitcoin knows that the Fed ALWAYS responds with a liquidity injection when things get bad,” the BitMEX founder wrote, adding:
Therefore Bitcoin will rise sharply before and into the Fed’s eventual capitulation to restarting money printer go brrr.
BTC is trading at $44,137 at press time and has been range-bound for the past day. In the past week, it has gained less than 4% to trade at a 52-week high above $45,000.
