We note that the arrest of the founder and former head of crypto-exchange FTX, Sam Bankman-Friede, came to light tonight. The entrepreneur has been detained by Bahamas police, with Sam now likely to face extradition to the US.

FTX founder Sam Bankman-Fried

Accordingly, developments in the cryptocurrency industry during this bearish trend have really gone quite far. And that’s exactly what Arthur Hayes focuses on.

When will Bitcoin start to rise?

The former BitMEX executive shared his thoughts in an online interview with renowned crypto enthusiast Scott Melker. Here is one of his quotes that perfectly summarizes the current market situation. The trader’s remarks are cited by Cointelegraph.

Going forward, I would say that almost everyone who could go bankrupt has already gone bankrupt.

To be fair, Hayes has been wrong about his predictions many times before. In particular, in the first half of 2022 he predicted a possible rise of ETH to $10,000 by the end of the year. As a condition for that, Arthur mentioned the successful transition of the Etherium network to Proof-of-Stake consensus algorithm, which implies a serious reduction in the ETH issue, that is, the issuance of new coins. As you can understand from the current rates, Hayes was seriously mistaken, well ether is 74 percent behind its record rate of $4,878.

Former BitMEX CEO Arthur Hayes

Hayes explained that when centralised cryptocurrency lending platforms have financial problems, they often raise loans first and then sell BTC from reserves because the main cryptocurrency operates as “the most liquid asset” in the market. The expert continues.

When you look at the balance sheet of any of these organisations, there are no bitcoins on it because they sold the coins either at the time of bankruptcy or even before it was officially announced.

This is also true for other coins. For example, sources say that trading company Alameda Research was actively selling its own SOL stock before FTX collapsed in order to buy FTT, the token they were using as collateral. In fact, the notable collapse of the Solana cryptocurrency over the past month is due in part to this.

Bitcoin exchange rate over the past 90 days

In other words, Bitcoin on the balance sheets of companies on the brink of bankruptcy is the most relevant asset to sell. BTC has the highest liquidity, which means that there will always be buyers for the reserves. Big bitcoin sales have already happened this year – a fact that suggests that the worst of what could have happened has already happened. Here’s Hayes’ quote on the subject.

I can’t demonstrably prove that all the bitcoins held by these bankrupt companies were sold off during the numerous market crashes. It looks like they struggled to liquidate the most liquid asset they had. All this just before they went bankrupt.

Volume of open positions in Bitcoin futures

The bottom line is to wait for “better times”. And Hayes believes they will be relatively soon.

I believe the US Treasury bond market will become dysfunctional at some point in 2023 due to the Fed’s tightening of monetary policy. At that point I expect the Fed to start the printing press and then, voila, Bitcoin and all other risky assets will go up sharply.

Recall that one of the main reasons for the 2021 bull run was the large issuance of the US dollar – this was done to cover losses from the quarantine caused by the COVID-19 pandemic. The non-stop printing of money has led to skyrocketing inflation in the US this year, causing the Federal Reserve to raise its benchmark lending rate every month. Once it reverses course, investors can prepare for the start of the bull run. In other words, BTC could show a noticeable rise as early as next year, which is what Hayes is hoping for.

😈 YOU CAN FIND MORE INTERESTING STUFF ON OUR YANDEX.ZEN!

Unfortunately, the concept of digital assets still has a lot of sceptics amongst government officials in the US. The day before, US Senator John Tester said in an interview on NBC that he sees no real reason for cryptocurrencies to exist in general.

I could not find anyone who could explain to me what there is in crypto other than “synthetics”. The problem is… if we regulate cryptocurrencies, people might think there is something real behind the concept.

Senator John Tester

According to Decrypt sources, Tester said during the interview that regulators should choose between two options: either ban crypto altogether, or create the proper conditions to control it. The senator himself admits that he has little experience in the field, but he would resort to the first option.

I am not a regulator and I am not involved in financial matters. I don’t see why these things cryptocurrencies should exist. I really don’t see it.

The senator's lack of experience in dealing with crypto is obvious from his proposals. Still, banning cryptocurrencies would require physically shutting down all nodes of a particular network worldwide. The prospect of such a thing is hard to believe.

While Tester has said that he is not a regulator, his role on the Senate Banking Committee gives him influence over decisions that affect the crypto market. The senator would be hard to change his mind if he suddenly had the chance to oppose some initiative that gives crypto more legitimacy in the US.

We think the scenario described by Arthur sounds logical enough. In addition, before that any bearish trend - including for the stock market - ended sooner or later. Accordingly, counting on a similar development will force investors to replenish their own holdings of crypto-assets, which will also be the basis for starting a new bull run.

What do you think about what’s happening? Share your opinion in our Millionaires Crypto Chat, where we discuss other important topics as well.