Arthur Hayes has closed his Bitcoin short position following initial concerns about a deep correction over the weekend.
On Sept. 6, Hayes, the former CEO of the BitMEX cryptocurrency exchange, warned that Bitcoin (BTC) could correct below the $50,000 psychological mark this weekend — as he opened a short position to capitalize on the downside.
Easing investor concerns, Hayes announced the closure of his short Bitcoin position, expecting a potential Bitcoin rally as soon as next week, he wrote in a Sept. 8 X post:
“Closed my $BTC short, made 3% profit… With Bad Gurl Yellen watching markets and releasing a weekend statement, if stuff continues to puke next week BTC *MIGHT* rise anticipating more USD liquidity.”
BTC/USD, 1-month chart. Source: Cointelegraph
According to Hayes, Bitcoin’s price may surge as early as next week, driven by increased US dollar liquidity from the Federal Reserve (Fed). The current weakness in the economy and financial markets could prompt this action.
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Bitcoin price could rally on US money printing
The expectation of more liquidity injections from the world’s largest economy could significantly bolster crypto investor sentiment and Bitcoin price action.
More downside action in traditional markets could indeed invite a liquidity injection by the Fed, Hayes wrote in a Sept. 7 X post:
“Bad Gurl Yellen is watching, if markets go down more she will definitely pump up the jam by printing more money.”
Liquidity injection prediction. Source: Arthur Hayes
The M2 money supply, which estimates all cash and short-term bank deposits across the US, could be the key to the next Bitcoin rally, according to Jamie Coutts, chief crypto analyst at Realvision, who wrote in a May 16 X post:
“This is due to a high correlation with $BTC bull cycles. Of the big 3 I track in my Bitcoin/Liquidity framework, Global M2 appears to capture the most of the moves.”
M2 money supply, all-time chart. Source: fred.stlouisefed.org
However, the rate of change in the money supply is more important than the nominal value, as “Bitcoin usually moves with shifts in M2 momentum,” added Coutts.
At the beginning of May, the M2 money supply turned positive year-over-year for the first time since November 2023, signaling that investors could soon start looking for hedges against inflation, such as Bitcoin.
Related: Key Bitcoin bull signal flashes for first time in nearly 2 years, hinting at 2x price surge
Bitcoin’s September correction in line with bull halving cycle: Analyst
Investor sentiment took a hit this week after fears of a sub $50,000 Bitcoin correction crashed the crypto market sentiment to “extreme fear.”
Despite widespread concerns, Bitcoin’s September downside remains in line with previous Bitcoin halving cycles, wrote popular analyst Rekt Capital in a Sept. 6 X post:
“When BTC retraced -7% in September in 2021. BTC rallied +39% in the following October. Bitcoin is currently down -9% this September.”
Bitcoin monthly average returns. Source: Rekt Capital
September has historically been a month of downside volatility, with average Bitcoin returns at -4.69%, making it the most bearish month based on average returns, according to CoinGlass data.
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