Billionaire Arthur Hayes analyzes the state of the crypto markets and says several major players have no more Bitcoin to sell
BitMEX founder Arthur Hayes looks at the possibility that Bitcoin may have already bottomed out in the bear market, saying that three key players are likely to have run out BTC to sell.
In a new blog post, the crypto veteran tells identifies three investor groups that were forced to part with their Bitcoin trusts this year due to abuse of leverage: centralized lending and trading companies, Bitcoin miners and ordinary speculators.
Looking first at centralized firms, Hayes says these institutions likely unloaded most of their BTC following the collapse of crypto hedge fund Three Arrows Capital (3AC) and Sam Bankman-Fried’s trading firm Alameda Research.
“When these two companies [Alameda and 3AC] got into trouble, what did we see? We saw large transfers of the most liquid cryptos – Bitcoin (WBTC in DeFi) and Ether (WETH in DeFi) – to centralized and decentralized exchanges, which were then sold. This happened during the Great Recession…
I can’t demonstratively prove that all of the Bitcoin held by these failed institutions was sold during the many crashes, but it looks like they tried their best to liquidate the most liquid crypto security they could right before they went under .
That [centralized lending firms] and all major trading companies have already sold most of their Bitcoin. All that’s left now are illiquid s**coins, private stakes in crypto companies and locked pre-sale tokens.”
As for Bitcoin miners, Hayes says they have net sold their BTC since the first credit crunch in June, when the king crypto fell below $20,000 for the first time in over 18 months.
“They have to do this in an effort to keep up with their large fiat debt loads. And if they don’t have debt, they still have to pay utility bills – and since the price of Bitcoin is so low, they have to sell even more of it to keep the plant operational.”
When it comes to regular speculators, Hayes says he looks at the amount of open interest (OI) on long and short contracts to gauge the level of speculation in the markets. According to him, the record high level of OI coincided with the peak level of BTC. OI also fell as the market fell, suggesting that speculators were wiped out.
“Taking a look at the sum of OI across all major centralized crypto derivatives, we see that OI’s local low also coincided with the sub-$16,000 spike of Bitcoin on Monday, November 14. Now OI is back to levels not seen since early 2021.
The timing and magnitude of the reduction in OI leads me to believe that most of the overleveraged long positions have been wiped out.”
Hayes concludes by saying that he is not 100% sure if Bitcoin’s current bear market low around $15,900 is the absolute bottom, but he says that BTC bounced from that level due to “the cessation of forced selling caused by a credit contraction .” He also notes that everything is cyclical.
“What goes down will go up again.”
At the time of writing, Bitcoin is changing hands for $17,170.
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