BitMEX CEO Arthur Hayes shared his views on potential market weakness and banking tactics in a recent article on Medium. While stressing that his opinions should not be considered investment advice, Hayes provides insight into the macro setup and his analysis of current market conditions.
Former BitMEX CEO Arthur Hayes shared his views on potential market weakness and banking tactics in a recent article on Medium. While stressing that his opinions should not be considered investment advice, Hayes provides insight into the macro setup and his analysis of current market conditions.
Hayes begins the article by drawing an analogy between his skiing experiences and his book on macro and crypto trading. He reflects on the recent ski season in Hokkaido, where unexpected weather conditions affected the quality of the snow. Similarly, he emphasized that the unexpected favorable conditions in March, especially the continued rise of cryptocurrencies, may not be repeated in April.
Turning to the banking sector, Hayes discusses the Bank Term Funding Program (BTFP), which recently ended. He explains that despite the cancellation, banks not too big to fail (TBTF) have not faced significant stress due to tricks used by financial institutions. Hayes delves into the discount window, a tool used by central banks to provide funds to banks in need. It explains how troubled banks can take advantage of the discount window by pledging eligible securities, but stresses that collateral conditions are currently less attractive than the previous BTFP.
In addition, Hayes discusses the role of bank capital requirements and their impact on the banking system. He explains that banks often prefer to buy government bonds over lending to businesses and individuals because of the regulatory framework. Basel III, the set of rules introduced after the 2008 global financial crisis, aimed to create a more resilient banking system. However, Hayes points out that these requirements have proven problematic during times of stress, and the Fed has allowed banks to hold U.S. Treasuries without collateral during market crashes.
In conclusion, Hayes suggests that April could experience extreme weakness in risk asset markets. While he is not directly shorting the market, he has closed several positions in lower-quality cryptocurrencies. He plans to remain in a no-trade zone until May, when he hopes to deploy his dry powder and position himself for the start of another bull market.
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