The post Arthur Hayes Explains Bitcoin’s Struggles with Fed Rate Cuts appeared on BitcoinEthereumNews.com.

BitMEX co-founder and former CEO Arthur Hayes has shared insights on why potential interest rate reductions by the US Federal Reserve may not significantly impact Bitcoin prices. In a post on X dated September 2, Hayes addressed the market’s reaction following Federal Reserve Chairman Jerome Powell’s August speech, where Powell hinted at a rate cut in September. Despite this, Bitcoin prices have dipped notably. Insights from a Leading Expert Following Powell’s speech, Bitcoin briefly rose to $64,000 but then fell by 10% to $57,400 by September 2. As of the latest update, Bitcoin has rebounded to $59,238 within the past 24 hours. Hayes attributes this fluctuation to reverse repurchase agreements (RRPs), a financial instrument where securities are sold with an agreement to repurchase at a higher price later, currently offering a 5.3% interest rate, surpassing the 4.38% yield from Treasury bills. Access NEWSLINKER to get the latest technology news. As a consequence, major money market funds are shifting their investments from Treasury bills to RRPs, reducing the liquidity available for riskier assets like cryptocurrencies. Hayes elaborated on X that the RRP program serves as a temporary holding place for cash for large banks and money managers, providing higher returns than other safe investments. This mechanism keeps funds idle in the “parking lot” rather than circulating in the economy. Additionally, since the Fed’s talk of a rate cut, $120 billion has been allocated to reverse repo agreements. What Does This Mean for Bitcoin? Hayes highlighted that this scenario contradicts the common belief that lower interest rates are beneficial for high-risk assets like Bitcoin. Typically, lower rates are thought to boost borrowing and spending, thus increasing market liquidity, making safer investments less appealing, and strengthening Bitcoin by weakening the dollar. The CME Fed Watch tool currently suggests a 69% probability of a…

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Filed under: News - @ September 3, 2024 8:21 am