Arthur Hayes: Cryptocurrency may plummet within days after the Federal Reserve's first rate cut, the era of central banks is over

ChainCatcher news, BitMEX co-founder and Maelstrom Chief Investment Officer Arthur Hayes stated in an interview with CoinDesk during the Token2049 conference in Singapore that the Federal Reserve is about to announce its first interest rate cut since 2020, but risk assets (including cryptocurrencies) may plummet within days after the cut.

Hayes believes that cutting rates is a bad decision because inflation remains an issue in the U.S., and lowering borrowing costs will exacerbate inflation. Additionally, the narrowing U.S.-Japan interest rate differential could lead to a significant appreciation of the yen, triggering the unwinding of yen carry trades. Hayes expects U.S. interest rates to eventually drop from the current 5.25%-5.5% to near zero.

He agrees with Scottish market strategist Russel Napier's view that the era of central banking is over, and politicians will take over and instruct banks to create liquidity in specific areas of the economy. Hayes stated that in this scenario, cryptocurrencies will become the only globally portable assets that allow investors to escape the system.