Bitcoin Faces Potential Correction Around BTC Halving: Arthur Hayes

Arthur Hayes, co-founder and former CEO of crypto exchange BitMEX, has cautioned that Bitcoin (BTC) may face selling pressure in the days surrounding the mining-reward halving scheduled for April 20.

Despite the event being widely considered bullish for the cryptocurrency, Hayes believes that the well-entrenched narrative could lead to a price correction.

Key points:

• The bullish halving narrative is “well entrenched,” which Hayes believes could lead to a price correction.
• U.S. tax payments are due on April 15, and the Federal Reserve’s quantitative tightening (QT) policies could remove dollar liquidity from the market.
• The timing of the halving, coupled with tighter dollar liquidity, could fuel a “raging firesale” of crypto assets.
• Hayes expects the Treasury General Account (TGA) balance to rise sharply in the second half of April, further reducing dollar liquidity.

Hayes said in his latest blog post, “Heatwave,” that when most people in the market agree on something, the opposite often occurs.

The bullish narrative surrounding the halving stems from historical data showing that Bitcoin tends to experience significant multimonth rallies in the months following the event. This time, the halving will cut the issuance per block to 3.125 BTC.

Read more: Binance Executive Pleads Not Guilty To Money Laundering Charges

Analysts expect Bitcoin correction following the halving

Some analysts argue that the market may have already priced in the supply slowdown, leading to a potential correction. 

Hayes also mentioned that, besides the potential correction during the halving, U.S. tax payments, scheduled for April 15, and the Federal Reserve’s policies of quantitative tightening (QT), could reduce the availability of dollars in the market.

This, in turn, could lead to broad-based risk aversion and a fire sale of crypto assets. Tax payments usually reduce the amount of money available in the financial system as individuals take money out of bank accounts and market funds to pay their taxes.

Hayes anticipates a significant increase in the balance of the Treasury General Account (TGA) during the latter part of April, which would further decrease dollar liquidity. He stated, “The period of concern for risky assets is from April 15th to May 1st.”

However, Hayes also anticipates that Treasury Secretary Janet Yellen will run down the TGA after May 1, providing a bullish tailwind to risk assets in the months leading up to the U.S. presidential election in November.