When the cat is away, the mice come out to play.
As the global economy is muddled with concerns surrounding trade wars, interest rate movements, and global governance dilemmas, the cryptocurrency world is enjoying a parabolic move. Over the past few months, traditional finance has slumped, while Bitcoin has surged by 200 percent.
With many analysts pointing to various internal reasons as a source or even as a catalyst for this drive in price, the answer may instead lie externally.
Fresh from his ‘Tangle in Taipei,’ Arthur Hayes, CEO of BitMEX, the futures-centric cryptocurrency exchange, looked to the banking elite and their macro-economic functions as providing a boost to the cryptocurrency industry.
In a recent interview with Ran NeuNer of CNBC CryptoTrader, Hayes mulled the prospect of a Bitcoin breakout over its December 2017 all-time-high, while pointing to the monetary policies of the globe’s largest economies as being the ‘main driver.’
“One of the major trends I see driving this [the Bitcoin parabolic move] is Central Bank money printing.”
Three key inklings of this Central Bank-driven Bitcoin price rally will likely come from the United States, the European Central Bank [ECB] and the People’s Bank of China [PBoC].
According to Reuters, the Federal Reserve could announce a cut in interest rates in late July, in reaction to the US-China trade war. The current interest rate of 2.25 percent was set in December 2018, with the Fed stating that 2019 could see an increase by 25 basis points.
Hayes also veered towards the PBoC’s reserve requirement ratio [RRR] cuts, in order to bolster the economy in the face of the aforementioned east-west trade war. Many Chinese analysts have suggested that the “speedy RRR cut” is a sign of the determination of sovereign administrators to push growth.
This RRR cut, the first in the calendar year by the Chinese bank, will, according to estimates, release over $115 billion which could find its way to crypto after a quick detour.
Hayes also spoke about the ECB’s Long Term Refinancing Operations [LTROs] which, according to Reuters, could come later in the year. This ECB operation will assist companies within the Eurozone by providing cheap and easy credit options. The last round of Targeted LTROs in 2016, lifted inflation by 0.3 percent in a two-year period.
However, this loss of funds within the largest economies of the world will not find a direct path to the decentralized currency world. Hayes added that the first pit-stop will be ‘loss-making’ start-ups. The BitMEX CEO said,
“This money is not going to make its way, really, into the crypto-ecosystem, until it finances more money-losing startups like Uber and Lyft, and all these massive public companies. Once people get done with those, then they will move down to their crypto-ecosystems.”
With macro-economic open market operations in full flow, Hayes predicted that quarter 1 of 2020 will be the beginning of the “upwards cycle.” It should be noted that the highly anticipated Bitcoin halving is scheduled for May 2020, and historically, as the halving nears, the price surges.
On the present, Hayes was a bit more cautious. He stated that the market would face some “chop” between the $10,000 – $20,000 range, and would not blow past this ceiling as others have predicted. This range will “not be easy” due to the “huge amount of volatility,” but a break will manifest in Q1 2020, added the CEO.
Chiding crypto over-optimists, Hayes stated that the Bitcoin parabolic move, one that takes the price between $30,000 to $50,000, will not manifest in this 6-month period.
While Hayes boils the positive factors down to retail push, custodial developments and other infrastructural changes in the cryptocurrency space, Nouriel Roubini, his opponent at the ‘Tangle in Taipei’ debate was not convinced. The economist in a snippet from the infamous debate stated that the recent price rally was driven by “price manipulation.”