Arthur Hayes, former CEO of crypto derivatives platform BitMEX, believes the worst may be over for Bitcoin (BTC) in this cycle as the “biggest and most irresponsible entities” run out of BTC to sell.
“Looking forward, almost everyone who could have gone bankrupt has gone bankrupt,” he said in a Dec. 11 interview with crypto advocate and podcaster Scott Melker.
Hayes elaborates on his point by explaining that when centralized lending companies (CELs) have financial problems, they will often request loans first and then sell BTC first because it acts as a “crypto reserve asset” and “the most pristine asset and the most liquid.”
“When you look at the balance sheet of any of these heroes, there’s no Bitcoin on it because what they’re doing is they sold Bitcoin when they went bankrupt, they sold Bitcoin during the wave before they went bankrupt.”
Hayes made a similar argument in a December 10 blog post, explaining that while this “credit crunch is ongoing,” large physical sales of BTC are taking place on exchanges from both CELs trying to avoid bankruptcy and trading firms that have withdrawn loans and must liquidate their positions.
Let’s try again.
— Arthur Hayes (@CryptoHayes) December 9, 2022
“That’s why the Bitcoin price goes down before the CELs go bankrupt. It’s a big move,” he said.
“I can’t demonstrably prove that all of the Bitcoin held by those failed institutions was sold during the multiple crashes, but it looks like they did their best to liquidate the most liquid crypto collateral they could right before they failed.”
Hayes, however, believes large-scale liquidations are coming to an end, explaining in a blog post that “There’s no reason why you should hold out if you have an urgent need for fiat.”
Related: Hong Kong Could Be Key to China’s Crypto Comeback – Arthur Hayes
After the collapse of crypto exchange FTX and the subsequent crash, the market is still deep in the grip of crypto winter, but Hayes believes the market could recover a bit in 2023.
“I believe the U.S. Treasury market will become dysfunctional at some point in 2023 because of the Fed’s tightening monetary policy,” he said, adding, “At that point I expect the Fed to turn on the printer’s bank and then boom shackles — Bitcoin and all other risky assets will rise.”