Arthur Hayes: The market may experience extreme weakness in April, with liquidity warming up in May to drive a crypto bull market

ChainCatcher news, BitMEX co-founder Arthur Hayes predicts in his latest blog post "Heatwave" that from mid-April to early May, U.S. taxation will drain market liquidity, coupled with the Federal Reserve's ongoing balance sheet reduction, which may lead to extreme market weakness. However, starting May 1, as the Federal Reserve slows down the pace of balance sheet reduction and the U.S. Treasury uses funds to stimulate the market, a new round of cryptocurrency bull market is expected to begin.

Hayes points out that the Federal Reserve has indirectly "infused" the banking system by relaxing capital requirements, allowing banks to hold more government bonds. The U.S. Treasury has also been increasing the issuance of short-term government bonds to absorb the trillions of dollars of idle funds in the Federal Reserve's reverse repurchase tool. Both measures are beneficial for enhancing market liquidity.

However, Hayes expects that the tax deadline on April 15 will drain a large amount of funds from the system. At the same time, the Federal Reserve continues to reduce its balance sheet by $95 billion per month. Additionally, the anticipated Bitcoin block reward halving on April 20 may lead to short-term overselling, all of which will put significant pressure on the market.

Hayes advises investors to act cautiously in April, but to deploy boldly after May. He reveals that he has currently closed positions in tokens such as MEW, SOL, and NMT for profit, and has transferred funds into the USDe stablecoin on the Ethena platform for staking. Hayes states that if he can avoid the loss risks in April, he will have ample ammunition to establish positions in various cryptocurrency assets in May and fully enjoy the benefits of the bull market.