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Bitcoin Might Not Benefit From Federal Reserve Rate Cuts, Former BitMEX CEO Explains Why

Ash Tiwari
by Ash Tiwari
9 months ago
·
Posted in Bitcoin Price
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

Co-founder and former CEO of BitMEX cryptocurrency exchange, Arthur Hayes, recently took to X to explain why he feels the highly-anticipated interest rate cuts by the US Federal Reserve might not have the expected impact on Bitcoin’s price.

Interest Rate Cuts Not The Silver Bullet For Higher BTC Price

Hayes stated on X that despite the Federal Reserve Chair Jerome Powell virtually confirming the incoming interest rate cuts from September 2024 onwards, Bitcoin price might not behave the way many in the crypto market expect it to.

Since Powell’s Jackson Hole speech on August 23, 2024, Hayes notes that Bitcoin price has been on a steady downward trajectory, tumbling from approximately $64,000 to $58,881 by Sep 3, 2024.

Related Reading: Moody’s Drops Bombshell On Crypto Industry Amid High Interest Rate Cuts

According to the former BitMEX CEO, the incoming interest rate cuts have made reverse repurchase agreements (RRPs) a relatively more attractive investment prospect than treasury bills which attracted significant capital during interest rate hikes beginning in March 2022.

For the uninitiated, RRPs are similar to short-term loans used in money markets, where one party – typically a central bank or a financial institution – sells securities to another party with an agreement to repurchase the same securities at a later date for a higher price. The difference between the sale price and the repurchase price is the interest earned by the purchaser of the securities. 

Currently, RRPs are paying a decent 5.3% interest, making them an attractive and safe avenue for institutions looking to temporarily park their capital. In comparison, 1-year treasury bills are paying 4.38% interest. 

Hayes adds that the delta in interest rates between RRPs and treasury bills is forcing large banks and money market funds to move their capital from treasury bills to RRPs, leaving less liquidity in the market that could be used to buy more risk-on assets such as BTC.

Notably, RRPs have received an injection of an additional $120 billion since the announcement of the probable interest rate cuts from September 2024. Hayes expects this trend to continue as long as treasury bill rates are lower than RRP rates.

Could Bitcoin Halving Play A Key Role In Resuming Bull Market?

Hayes’ explanation runs counter to the widely shared assumption that interest rate cuts help boost the price of risk-on assets such as stocks and digital assets. However, it should be recalled that this year also saw the first Bitcoin halving since 2020.

Historically, Bitcoin has gone on to appreciate in value during its halving years, including in 2020 when the COVID pandemic decimated prices of all risk-on assets early in the year. Several seasoned analysts expect Bitcoin to replicate its post-halving price action, igniting a new bullish momentum that could propel the leading digital asset to new all-time-high prices.

Related Reading: Here’s When The Bitcoin Price Could Top According To Past Halving Cycles

The culmination of interest rate cuts, Bitcoin halving, along with increased institutional interest in Bitcoin exchange-traded-funds (ETFs) in 2024 holds the potential to make for an exciting rest of the year in the crypto industry.

bitcoin
Bitcoin price trades slightly below $60,000 | Source: BTCUSD on TradingView.com
Featured Image from Unsplash.com, Chart from TradingView.com
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Ash Tiwari

Ash Tiwari

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Ash is a seasoned freelance editor and writer with extensive experience in the blockchain and cryptocurrency industry. Over the course of his career, he has contributed to major publications, playing a key role in shaping informative, timely content related to decentralized finance (DeFi), cryptocurrency trends, and blockchain innovation. His ability to break down complex topics has allowed both seasoned professionals and newcomers to the industry to benefit from his work. Beyond these specific roles, Ash's writing expertise spans a wide array of content, including news updates, long-form analysis, and thought leadership pieces. He has helped multiple platforms maintain high editorial standards, ensuring that articles not only inform but also engage readers through clarity and in-depth research. His work reflects a deep understanding of the rapidly evolving blockchain ecosystem, making him a valuable contributor in a field where staying current is essential. In addition to his writing work, Ash has developed a strong skill set in managing content teams. He has led diverse groups of writers and researchers, overseeing the editorial process from topic selection, approval, editing, to final publication. His leadership ensured that content production was timely, accurate, and aligned with the strategic goals of the platforms he worked with. This has not only strengthened his expertise in content strategy but also honed his project management and team coordination skills. Ash's ability to combine technical expertise with editorial oversight is further bolstered by his knowledge of blockchain analysis tools such as Etherscan, Dune Analytics, and Santiment. These tools have provided him with the data necessary to create well-researched, insightful articles that offer deeper market perspectives. Whether it’s tracking the movement of digital assets or analyzing blockchain transactions, his analytical approach adds value to the content he produces, ensuring readers receive accurate and actionable information. In the realm of content creation, Ash is not limited to just cryptocurrency markets. He has demonstrated versatility in covering other emerging technologies, market trends, and digital transformation across various industries. His in-depth research, coupled with a sharp editorial eye, has made him a sought-after professional in the freelance writing community. From developing editorial calendars to managing content delivery schedules, he has honed a meticulous approach to project management that ensures timely, high-quality work delivery. Throughout his freelance career, Ash has consistently focused on improving audience engagement through well-researched, insightful, and relevant content. His ability to adapt to the evolving needs of clients, whether it's enhancing the visibility of digital platforms or producing thought-provoking pieces for a wide range of audiences, sets him apart as a dynamic force in the field of digital content creation. His contributions have helped to shape a well-rounded portfolio that showcases his versatility, technical expertise, and dedication to elevating the standards of journalism in blockchain and related sectors.

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