Arthur Hayes Says Fed Rate Cut Is Political, Expects Long-Term Market Implications

In a statement at the ongoing Token 2049 conference in Singapore, BitMEX co-founder Arthur Hayes stated that the 50 basis points (bps) interest rate slash is politically motivated and may have underlying market and economic implications in the long term.

For context, the US Federal Reserve System (Fed) has given the global market a relief ride since Wednesday after cutting interest rates. The rate reduction was the first in four years amidst surging signs of a recession decline in the United States.

Politically-Fueled Rate Cut

Hayes sees the rate cut as a means to an end for the incumbent US government. The BitMEX co-founder stated that the Democrats may be using the reduced interest rate to bolster support for the upcoming November presidential elections.

“I have a macro view that Jerome Powell and Janet Yellen want to juice financial markets to help Kamala Harris win the election. I believe that they’re trying to get markets to go even higher to make people feel even wealthier as they go into the ballot box in November,” Hayes said.

It bears mentioning that Bitcoin has been on an impressive run since the cut, souring over 5% in the past 24 hours to a price last seen on August 27. The asset has surged over 8% in the past seven days.

However, Hayes argues that the impending market capitulation will outlive the brief rally. He states that inflation will crawl back into the US, and the market will experience long-term weakness. 

Hayes Gives Indicator for Next Market Move

In a tweet, Bitcoin enthusiasts stated that Bitcoin’s next short-term move will be dictated by the Japanese yen’s price action against the dollar. Hayes noted that Bitcoin will rally if the Yen carry trade shows weakness and crash at a reversed trend.

Hayes has expressed skepticism about the recent rate cut. In one of his numerous Substack posts, the BitMEX ex-boss stated that a rate cut was not good for the financial market. He cited a surge in the US Reverse Repurchase Agreement (RRP), which would hamper the growth of risk assets like Bitcoin.

At the time of writing, Bitcoin traded at $63,000