BitMEX founder Arthur Hayes, who accurately predicted a 30-40% correction in Bitcoin in early January, has once again released a lengthy article titled “Yellen or Talkin’?”. In the article, he mentions that the recent plunge in Bitcoin was not caused by GBTC but by the Bank Term Funding Plan (BTFP). He also shares his strategic approach, stating that if the BTFP is extended in March, he will buy Bitcoin at $35,000 and invest in Solana, as well as the meme tokens WIF and Bonk.
Contents:
Toggle
The recent plunge in Bitcoin was not caused by GBTC but by the BTFP
Hayes’ strategic approach
Scenario 1: BTFP not extended
Scenario 2: BTFP extended
Hayes mentions that the argument that the recent drop in Bitcoin was due to outflows from the Grayscale Bitcoin Trust Fund (GBTC) is incorrect. When calculating the outflows from GBTC and the inflows from newly listed Bitcoin ETFs, the net inflow was $820 million as of January 22 (the first six trading days). The latest data also shows a net inflow of $1 billion for the previous seven days.
Hayes believes that the reason for the Bitcoin plunge is its anticipation of a liquidity crisis in the US dollar due to the expiration of the Bank Term Funding Plan (BTFP) in March. However, with the 10-year Treasury yield not dropping to the 2-3% range, small banks still have unrealized losses on their bond portfolios and cannot recover profitability. Without the support provided by the BTFP, these banks will not survive, leading to a small-scale financial crisis and forcing the Federal Reserve to cut interest rates, reduce QT, and/or resort to quantitative easing.
The ETF has corrected from its approved high of $48,000 to $33,600. Therefore, Hayes believes that Bitcoin will find support between $30,000 and $35,000. The subsequent actions will depend on whether the BTFP will be extended or not.
Currently, neither Fed Chair Powell nor Treasury Secretary Yellen have mentioned the upcoming expiration of the BTFP in March. In the event of expiration, banks will have to repay nearly $200 billion in loans. Therefore, Hayes has purchased put options with an exercise price of $35,000 and an expiration date of 3/29 as a hedge. He has also sold his positions in Solana and Bonk at a slight loss.
If the BTFP is extended, Hayes will:
Close existing options positions
Sell Treasury bonds
Buy Bitcoin at or below $35,000
Invest in Solana and meme tokens WIF and Bonk
(
Solana surpasses $120, Bonk and WIF gain traction
)
Arthur Hayes
BONK
BTFP
Solana
WIF
Bitcoin
Further reading:
Solana may launch second-generation smartphones at a lower price than the first-generation Saga
Solana Developer Ecosystem 2023 Report: Unveiling the truth behind Solana’s rebirth