Bitcoin is experiencing a major decline today, dipping below the $64,000 mark to a low of $63,564. This drop represents a 2.5% decrease within the last 24 hours and an overall 12% decline over the past two weeks. Amidst this downward trend, Arthur Hayes, the co-founder of BitMEX, will not be only maintaining his bullish stance on Bitcoin but actively encouraging investment, advocating a method to ‘buy the dip.’ His optimism and advice are deeply rooted in an evaluation of worldwide economic conditions and central bank policies, which he believes will favor cryptocurrencies like Bitcoin.

Buy The Bitcoin Dip?

Hayes’s insights draw attention to the aggressive monetary policies implemented by central banks, particularly the US Federal Reserve. These policies, including rapid rate of interest hikes—probably the most aggressive because the Eighties—were initiated in response to rising inflation in the US. The hikes have had a profound impact on the bond market, particularly affecting US Treasuries (USTs), which saw a decrease in prices as a result of the rising yields. Japanese banks, in quest of yield amid domestically near-zero rates of interest, had heavily invested in these USTs.

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The strategy backfired when US rates rose, resulting in significant paper losses for these banks. Hayes specifically points to the situation with Norinchukin Bank, which was compelled to dump $63 billion in foreign bonds, mostly USTs, to cut back these losses. This scenario underscores a broader trend amongst Japanese banks, which may have to proceed offloading USTs and other foreign bonds as they adjust to the brand new economic realities imposed by US monetary policy.

Hayes argues that these developments have critical implications for the crypto market, particularly Bitcoin. He notes that the responses by central banks to stabilize financial markets—resembling the Federal Reserve’s decision to offer a blanket backstop in March 2023 following a series of bank failures—not directly profit cryptocurrencies. This intervention led to a surge in Bitcoin’s price, reinforcing its status as a viable alternative investment during times of monetary instability.

Furthermore, Hayes points out the operational details of the FIMA repo facility, which was expanded by the Fed to bolster liquidity. He explains, “An increase within the FIMA repo facility indicates an addition of dollar liquidity to the worldwide money markets. Y’all know what meaning for Bitcoin and crypto … which is why I assumed it needed to alert readers about one other avenue of stealth money printing.” This mechanism allows central banks to exchange their holdings of USTs for dollars, increasing the dollar supply without flooding the market with bonds and potentially driving up yields.

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The implications for Bitcoin and other cryptocurrencies are profound, in response to Hayes. He suggests that as central banks, particularly the Bank of Japan, might use these facilities to administer their exposure to USTs, the resultant increase in dollar liquidity could drive investors towards cryptocurrencies. This movement is seen as a hedge against potential inflation and currency debasement resulting from these monetary expansions.

Hayes vividly describes the effect of those macroeconomic maneuvers on the crypto market: “Just as many began to wonder where the following jolt of dollar liquidity would come from, the Japanese banking system dropped Origami cranes composed of crisply folded dollar bills upon the laps of crypto investors. That is just one other pillar of the crypto bull market. The provision of dollars must increase to keep up the present Pax Americana dollar-based filthy economic system.”

In a rallying call to the crypto community, Hayes concludes, “Say it with me, ‘Shikata Ga Nai’, and buy the fucking dip!” Through this declaration, he underscores his belief that despite the volatile market conditions, the underlying economic and monetary developments are creating favorable conditions for Bitcoin’s growth. His evaluation suggests that savvy investors should view the present price drops as buying opportunities, given the broader economic backdrop that he believes will proceed to propel interest and investment in cryptocurrencies.

At press time, BTC traded at $64,159.

BTC price dips below $64,000, 1-day chart | Source: BTCUSD on TradingView.com

Featured image from Forkast News, chart from TradingView.com