BitMEX co-founder Arthur Hayes recently published an article titled “Sugar High,” highlighting the short-term effects of the Federal Reserve’s potential interest rate cut.
Hayes also emphasized that assets like Bitcoin will likely benefit from a liquid global financial market that may come from inflation.
Japanese Yen Could Disrupt U.S. Financial Market
In a keynote address on August 23, Fed chair Jerome Powell hinted that interest rates would be reduced in September, citing a considerable cooling off in the labor market “from its formerly overheated state.”
This move, often considered good news for consumers, entails reduced interest rates on mortgages, credit cards, and car loans, easing borrowing and spending. The Fed aims to avert recession and stimulate the economy and employment through the rate cut. Recall that the United States senator Elizabeth Warren once solicited for the interest rate reduction because it made it difficult for Americans to pay rent.
Hayes argued that a lean toward rate cut would only have short-term benefits, similar to how sugary processed foods can give an energy boost for the short term. The crypto enthusiast called for a rate hike as it had a long-term gain in economic performance.
“The Fed is reaching for the rate cut sugar high before hunger arrives. From a purely economic perspective, the Fed should be raising, not cutting, rates,” he wrote.
Hayes also highlighted how Powell’s Friday announcement impacted the Japanese yen. Cutting the interest rate decreases the interest rate gap between the U.S. dollar and the yen, thereby triggering the latter’s appreciation. The BitMEX co-founder warned that the yen increase could pressure global markets, especially dollar-denominated assets, potentially causing market turmoil.
Impact on Crypto Assets
Although Hayes advocates a rate hike, an interest rate cut could send crypto assets like Bitcoin to incredible heights as Americans have more money to spend.
Notwithstanding, the crypto proponent expressed optimism that a liquid environment in the global financial market could profit Bitcoin and other cryptocurrencies.
