Arthur Hayes: If the Federal Reserve chooses to cut interest rates, Bitcoin will quickly rise to $70,000

ChainCatcher news, BitMEX founder Arthur Hayes stated in a blog that if the Federal Reserve continues to raise interest rates, real rates will become more negative and may remain in this state for the foreseeable future. The reason Bitcoin has failed to reach $70,000 is that people are more focused on the nominal Federal Reserve rates and have not compared them with the high nominal GDP growth in the U.S.

Hayes believes that the Federal Reserve's true priority is to protect banks and other financial institutions from bankruptcy, as the decay of bonds has spread so widely and deeply throughout the financial sector that it could potentially lead to a complete system collapse. The only option for the Federal Reserve is to cut interest rates, restore the health of the U.S. banking system, and watch Bitcoin quickly move towards $70,000.

The reason Bitcoin has such a positive correlation with Federal Reserve policies is that the high debt-to-GDP ratio has led to the collapse of traditional economic relationships. This is similar to raising the temperature of water to 100 degrees Celsius; it will remain in liquid form until it suddenly boils and turns into gas. In extreme cases, things can become nonlinear and potentially bifurcate.

Although Hayes believes the Federal Reserve may be forced to lower interest rates to near zero and restart quantitative easing, he thinks that even if this does not happen, Bitcoin can still rise significantly.