Late last week, Arthur Hayes, Co-Founder and Former CEO of BitMEX, wrote about the potential implications of the Federal Reserve’s new Bank Term Funding Program (BTFP), which came as a response to the recent (SVB) collapse of Silicon Valley Bank (SVB).
In this blog post, Hayes calls BTFP “Yield Curve Control (YCC) repackaged in a new, shiny, more palatable format” and says, “it is a very clever way to accomplish unlimited buying of government bonds, without actually having to buy them. He argues that the move will significantly affect the banking industry and financial markets and may drive more investors towards alternative assets such as Bitcoin.
Hayes notes that, unlike the 2008 financial crisis, this time around, the Fed did not bail out banks and allow them to participate in the upside. Instead, banks must pay higher interest rates, leading to negative earnings. This situation may persist until bank balance sheets are repaired, and he expects that bank stocks will likely underperform the general market.
However, Hayes predicts that money will pour into the U.S. from abroad, strengthening the dollar, and that other major developed countries’ central banks will follow suit and enact similar guarantees to prevent the outflow of banking deposits and weakening of their currencies. He points out that this move effectively enables infinite money printing and may lead to a Bitcoin rally similar to what was seen during the COVID money printing episode.
The former BitMEX CEO believes that Bitcoin’s weightless and invisible nature, compared to other savings vehicles such as gold and real estate, may make it an attractive option for investors looking to protect their wealth. He cautions, however, that investors should be careful to purchase Bitcoin in physical form rather than investing in the liability of some member of the financial system.
Hayes also suggests that the media will likely push the narrative that the recent banking crisis happened because banks accepted fiat deposits from crypto folks, which he finds absurd. So instead, he argues that crypto once again demonstrated that it is the smoke alarm for the fiat-driven Western financial system.
Hayes is generally bullish on Bitcoin and crypto and intends to liquidate most of his stock portfolio and move it into crypto. He also wants to ensure his real estate portfolio is diversified across various jurisdictions and that he adequately protects his downside by investing in his favorite volatility hedge fund.