In an exclusive interview with CryptoNews, former BitMEX CEO and the CIO of Maelstrom, Arthur Hayes shared his insights on the impact of U.S. tariffs, the Federal Reserve’s monetary policy, and the increasing role of crypto in global finance. With markets facing uncertainty from aggressive trade policies and the potential creation of a national crypto reserve, Hayes provided his perspective on what lies ahead.
Hayes remains bullish on Bitcoin in the long term while he sees the current worst case scenario for the leading cryptocurrency at $70,000.
The Inflationary Impact of U.S. Tariffs
Goldman Sachs recently estimated that a 25% tariff on Canada and Mexico could raise U.S. inflation by 0.6%. If former President Donald Trump pursues such aggressive trade policies, it could complicate the Federal Reserve’s ability to cut interest rates. Hayes, however, pointed out that the inflationary impact of tariffs isn’t straightforward.
“Tariffs could be inflationary, or the tariffed country could manipulate their currency weaker against the USD to blunt the net effect to the consumer. Also, the local producer might decide to shoulder the tariff cost to maintain sales numbers and market share. Therefore, it’s unclear how inflationary they will be.”
Institutional Reactions to Liquidity Crisis
As concerns mount over a potential Fed-induced liquidity crisis, investors are closely watching how institutional players will react. According to Hayes, history shows that in times of financial stress, liquidity becomes the primary factor driving market movements.
“If there is a broader sell-off in risky financial assets, funds will sell whatever is liquid. Therefore, it is a correlation one moment, where everything initially falls together.”
Market’s Reaction to Trump’s Announcement of Crypto Reserve
Earlier this month, Trump announced the creation of a U.S. crypto strategic reserve, including specific altcoins, including ADA and XRP. While the news generated excitement, Hayes remains skeptical about its execution.
“Trump is trying to boost market sentiment with positive statements and executive orders. It is unclear how his administration will fund purchases of crypto and when said buying would commence.”
Following Trump’s announcement, the crypto market saw a rapid price surge, only to experience a swift correction. Hayes believes the reaction was a natural market movement rather than an orchestrated event.
“The market rightly looks through the positive statements and wants to know how the government will fund the purchases. That is why the initial pump was undone in less than 24 hours. There is no foul play.”
Short-Term Outlook for Crypto Amid Volatility
With heightened volatility in the crypto market, traders are adjusting their strategies. Hayes expects range-bound price action in the short term but anticipates a stronger upward movement in the coming months.
“My short-term outlook is for choppy range-bound trading. At Maelstrom, we are cautiously and slowly adding risk at the bottom of the range. We expect explosive upward movements a few quarters away.”
Long-Term Implications of Government Crypto Reserves
The establishment of government-backed crypto reserves raises critical questions about their sustainability. Hayes emphasized the importance of evaluating how these reserves are funded. Arthur Hayes noted:
“National strategic crypto reserves should be evaluated on how they will be funded. Is it from savings, or are countries taking on debt and printing money to afford the purchases? Also, how immune are the funds from changes in political leadership? If political parties change leadership roles often, are the crypto reserves on the chopping block to be depleted?”
The Evolving Challenges for Crypto Traders
Crypto trading has evolved significantly, with macroeconomic factors playing an increasingly dominant role. Hayes highlighted how the industry’s growing size has made it more intertwined with traditional financial markets.
“Crypto is even more tied to global fiat liquidity conditions as it grows in size and is recognized by an increasing number of institutional investors as a suitable investment. The importance of global macroeconomics and politics to crypto will only grow over time. It adds additional considerations to investment and trading decisions over and above how well the technology works and the pace of user growth.”
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