Arthur Hayes, BitMEX co-founder, has warned that the Federal Reserve's current economic strategies, likened to a "sugar high," could lead to a substantial increase in Bitcoin's value, influencing broader cryptocurrency markets.

Hayes Warns of Bitcoin Surge Due to Fed's 'Sugar High'

According to BitMEX co-founder Arthur Hayes, the US Federal Reserve's moves are similar to a temporary "sugar high" for the economy, which could lead to rally spillover effects in the cryptocurrency market.

The most recent piece by Hayes on Medium draws a direct line between certain actions taken by central banks and the possibility that they may encourage investors to put their money into Bitcoin and other cryptocurrencies.

Fed's Rate Reductions Could Lead to Yen Carry Trade Unwind

Hayes points to the US Federal Reserve's rate reduction as the reason why the Japanese yen carry trade could unravel, and until the Fed "raises the quantity of money," it could "derail the party."

Even though conventional markets might weather a temporary dip in interest rates, Hayes thinks that the real damage would come to fiat currencies and crypto assets in the long run.

According to Hayes, if the interest rate disparity continues to shrink, the yen will probably increase, which could cause instability in global markets and lead central banks to further expand their balance sheets.

Bitcoin to Benefit from Central Banks' Balance Sheet Expansion

Hayes calls this growth of the balance sheet "real food" since it would increase market liquidity and maybe cause assets with limited supply, like Bitcoin, to appreciate in value.

In the yen carry trade technique, which is discussed in Hayes' essay, investors borrow yen at low interest rates and then use it to invest in other currencies that provide higher returns.

Cointelegraph shares that Hayes points out that the strategy's attractiveness is diminishing due to central banks cutting interest rates, which might cause the yen to strengthen and these trading positions to be unwound.

“The fiat liquidity conditions could not be more favourable going into the final stretches of the third quarter. We have the following tailwinds at our backs as crypto hodlers:”

Bitcoin and Ether Must Hit Milestones for Altcoin Season

Hayes stated on Substack on August 12 that the altcoin season cannot begin until Bitcoin (BTC) and Ethereum (ETH) reach price benchmarks of $70,000 and $4,000, respectively.

“The combination of a dollar liquidity-inspired Bitcoin and Ether rally into year-end will create a strong foundation for the return of a sexy shitcoin soiree.”

According to Hayes, Bitcoin will "quickly retrace the dump" caused by the strengthening of the yen, and the next stop will be $100,000, if $301 billion in T-bills are "net issued" by year-end.