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Bitcoin’s short-term price trajectory, according to BitMEX co-founder Arthur Hayes, depends on US political developments. He underlined that the cryptocurrency industry is currently in a wait-and-see stage in a recent article on X.
The stability of Bitcoin, according to Hayes, hinges on how effectively former US President Donald Trump handles fiscal policy should he win reelection. He cautioned that Bitcoin might drop back to levels observed prior to election-related excitement if Trump is unable to approve a budget that lifts the debt ceiling and increases spending.
“If Trump can’t pass his budget which spends more and hikes debt ceiling, resume capitulation to levels pre the election day victory: $75,000 to $70,000. This is test of how strong Trump’s hold is on the Republican party.”
Beyond politics, Hayes pointed to hedge funds holding BlackRock’s iShares Bitcoin exchange-traded fund (IBIT) as another factor that could drive Bitcoin’s price lower. He suggested that many IBIT investors used a strategy of buying the ETF while shorting Bitcoin futures on the Chicago Mercantile Exchange (CME).
If Bitcoin’s price declines, the yield from this strategy may no longer be attractive, leading these funds to unwind their positions. Hayes predicts this could push Bitcoin down further.
“Bitcoin goblin town incoming: Lots of IBIT holders are hedge funds that went long ETF short CME future to earn a yield greater than where they fund, short-term US treasuries.”
He added that with profits locked in, hedge funds might start exiting their positions, particularly during US trading hours.
“These funds are in profit, and given basis is close to UST yields they will unwind during US hours and realize their profit. $70,000 I see you mofo!”