Arthur Hayes, co-founder and former CEO of major crypto derivatives platform BitMEX, said that Terra’s failure was a byproduct of the macroeconomic environment as the Fed raised rates and tightened its balance sheet.
He expressed confidence in the broader market in the medium and long term, reiterating that Ethereum could still reach $10,000 by the end of the year. In his view, the market is currently either near or at the bottom of the cycle, and will begin a comeback once the Fed slows rate hikes.
Terra’s collapse as a result of an ongoing liquidity crisis
In his latest blog post, the former CEO predicted that the Fed will continue the accelerated process of raising interest rates throughout the third quarter, adding to the pressure currently on the crypto market. He also ruled out the possibility that the sinking of the UST could be a sign of a local bottom.
Diving into the possible root causes of the recent downturn of Terra’s ecosystem, he concurred with a suggestion that the broader risk-averse environment prompted VCs to capitalize on LUNA investments all at once, ultimately leading to a liquidity crisis. which drove the price of the stablecoin down. He added that once the peg was closed, people started swapping their UST for other stablecoins or fiat currency, which worsened the situation and resulted in the total collapse of its sister token, LUNA.
“The collapse of the TeraUSD was an indirect result of tightening global central bank liquidity. Thus, I believe this event has further added to the pain that the bottom line has been in for months anyway as the Fed. And others have continued to tighten liquidity positions.
However, he clarified that the Fed’s aggressive policies were only an indirect catalyst as the final nail on Terra’s coffin was “collapsed because of how it was programmed.”
Are we at the bottom now?
By analyzing the correlations between bitcoin/ether and the Nasdaq 100 during the recent global equity selloff, Hayes concluded that crypto began to diverge from broader risk assets and such observations as indicators of a potential local bottom. cited.
Furthermore, as bitcoin and ether prices were close to earlier local tops, respectively, Hayes predicted that bitcoin bottoms could be between $25,000 and $27,000, while ether bottoms could range between $1,700 and $1,800. It is possible Thus, he said it is encouraging that the local low is close enough to the previous all-time high because “it means a substantial amount of pain was felt.”
A bustling market ahead
Despite the expectation that the bottom was already in place, Hayes said, a “quick climb” of prices may not happen in the immediate future. Noting that the broader market will remain volatile and choppy in the short term, he stressed that only with the Fed aggressively changing its current policy can a substantial return to the market.
“A choppy price action will drain the capital of short-term traders who half-heartedly believe it is at the bottom…
Despite the recent volatility in the broader market, Hayes reaffirmed his belief that Ethereum could reach $10,000 by the end of the year in the event of a resumption of the bull run.
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