Why You May Have to Wait a Little Longer for a Cryptocurrency Bull Market

Arthur Hayes predicts a rise in cryptocurrencies, but he believes it might not happen until the end of September. Here’s why.

A year ago, Bitcoin was trading at $25,800. Since then, its value has more than doubled to $56,400. However, despite this significant increase, market sentiment does not suggest that a rise is imminent. Fear and Greed Indexa measure of investor optimism on a scale of 1 to 100,

remains at 34, the same level as a year ago, indicating fear, while the total market capitalization of cryptocurrencies has fallen by $400 billion since August.

Increased demand for bitcoin stemming from the launch of bitcoin spot ETFs in January – as a group, they already have attracted $17.3 billion in inflows helped bitcoin hit an all-time high of nearly $74,000 in March, fueling widespread expectations of a continued bull market for cryptocurrencies. But to investors’ dismay, that has so far failed to materialize.

So when will the long-awaited cryptocurrency bull market begin?

Arthur Hayes, the co-founder of BitMEX, said that the app’s launch might not happen until the end of September. In a recent blog post jobHayes explained that the bull market’s delay is tied to broader economic conditions, particularly the actions of the U.S. Federal Reserve and government spending policies. While his analysis delves deeply into macroeconomics, the implications for cryptocurrencies are clear: a surge in bitcoin and other cryptocurrencies could be on the horizon, but it may take a little longer to materialize than some had anticipated.

Short-term U.S. interest rate futures are now reflective Analysts believe that a 50 basis point interest rate cut by the Federal Reserve in September is more likely than a 25 basis point cut. Looking at past events, Hayes points out that the Fed’s decision to suspend interest rate hikes in September 2023 has led to a rise in US Treasury yields. When these yields rise, it becomes more expensive for the government to finance its deficit, which can have a cascading effect on the economy.

The key number to watch here, according to Hayes, is the 10-year Treasury yield hitting 5% (yields are (currently at 3.7%). If that happens, it could trigger a market shakeout that could initially push stocks and cryptocurrencies lower, but would eventually lead to a surge as the government responds with new cash injections to lower Treasury yields, making it cheaper to finance its deficit. The lower rates resulting from these injections would ease financial conditions, which is generally positive for risk assets like bitcoin.

For the cryptocurrency market, the pause in rate hikes is a double-edged sword. On the one hand, it suggests that the era of monetary tightening is coming to an end. On the other, rising bond yields could create short-term pressure on the market as they make riskier assets less attractive. Hayes believes that while bitcoin could fluctuate or even decline in the short term, the long-term outlook remains bullish. He predicts that the real recovery will begin once the government steps in with new measures to inject liquidity into the market, likely around the end of September.

“If this scenario plays out, I expect intervention to begin in late September. Until then, bitcoin will continue to fall at best, and altcoins could sink even deeper,” Hayes wrote.

Additionally, September has consistently been bitcoin’s worst month, with an average loss of 4.71%, according to CoinGlassIn contrast, October was generally a strong month for bitcoin, with an average positive return of 22.9%.

Adding another layer to this perspective, Outlier Ventures recently released a report They challenge the conventional wisdom that Bitcoin’s four-year halving cycle is the primary driver of price gains. According to their analysis, “2016 was the last time the halving had a fundamental and significant impact on BTC price action.” They argue that current market dynamics are driven more by macroeconomic factors, such as government spending and global liquidity conditions, rather than the reduction in the supply of new bitcoins.

Learn more: Bitcoin Price Performance After Halving Is Worst Ever So Far

While the cryptocurrency market could face more turbulence in the coming weeks, Hayes remains optimistic that a bull run is imminent. His advice to traders? Be patient and watch for signs of a liquidity injection that could spark the next big move in crypto.