- Arthur Hayes thinks the current market trends could hasten the return of a crypto bull market.
- The BitMEX co-founder observed a quickly rising bear steepener difficult for the mainstream market to handle.
- Hayes believes the fast-rising steepener would expose the mainstream markets.
The BitMEX co-founder, Arthur Hayes, thinks the prevailing traditional market trends could hasten the return of a crypto bull market. Hayes observed a quickly rising bear steepener that is proving difficult for the mainstream market to handle. He believes the fast-rising steepener would expose the mainstream markets and force the government to print more money to save the bond market.
The faster this bear steepener rises, the faster someone goes belly up, the faster everyone recognises there is no way out other than money printing to save govt bond markets, the faster we get back to the crypto bull market :). The Lord is my Shepherd, I shall not want.— Arthur Hayes (@CryptoHayes) October 4, 2023
Hayes concluded following a broader analysis of the current mainstream market situation. According to Hayes, the market yields are screaming higher, and the bank models have no concept of a bear steepener occurring. The BitMEX co-founder spotted a crucial development in the historical interest rate regimes.
A screenshot that Hayes shared showed an almost empty quadrant, suggesting the absence of steepeners with the banks. Hence, the bank models do not have it. He noted that as the 2s30s curve steepens alongside 2-year and 30-year rates rise, fixed-income trading desks start bleeding money and can’t figure out why.
If the banks' models don't have it, then it is considered not a possible outcome and traders don't hedge.As the 2s30s curve steepens along side 2yr and 30yr rates rising, fixed income trading desks start bleeding money and can't figure out why. pic.twitter.com/Q42uuYEDXy— Arthur Hayes (@CryptoHayes) October 4, 2023
According to Hayes, banks will start selling bonds or paying fixed amounts to the IRS as rates rise. That would result from the leverage and non-linear risks embedded in the banks’ portfolios. He believes more selling would beget even further selling, which is no bueno for bond prices.
Joe McCann, founder of Asymmetric, supported Hayes’ submission. McCann claimed to have been describing the same scenario for several weeks, a bear steepener where the banks lose control of the long end of the curve. According to him, the current situation reflects his predictions.
The crypto market has started the final quarter of 2023 with an early bullish sentiment. Bitcoin embraced the new quarter by surging 6% in less than 48 hours before pulling back to retest the support at $27,500. Staying above this level could see Bitcoin rally higher, perhaps in preparation for the upcoming halving.
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