Arthur Hayes: BTFP is the Key, Bottoming out BTC, SOL, and Dogecoin

BitMEX founder Arthur Hayes, who accurately predicted a 30-40% correction in Bitcoin earlier this month, has released another lengthy article titled “Yellen or Talkin’?” In the article, he mentions that the recent plunge in Bitcoin is not due to the outflow of funds from the Grayscale Bitcoin Trust (GBTC), but rather the Bank Term Funding Plan (BTFP). He also shares his strategic approach, stating that if the BTFP is extended in March, he will buy Bitcoin at $35,000 and invest in Solana, as well as meme coins WIF and Bonk.

Table of Contents:
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The recent plunge in Bitcoin is not due to GBTC, but BTFP
Hayes’ strategic approach
Scenario 1: No extension of BTFP
Scenario 2: Extension of BTFP

Hayes mentions that the argument that the recent drop in Bitcoin is due to the outflow of funds from the GBTC is incorrect. When comparing the outflow from GBTC with the inflow of the newly listed spot Bitcoin ETF, the net inflow was $820 million as of January 22 (the first six trading days). The latest data also shows a net inflow of $1 billion for the previous seven days.

Hayes believes that the reason for the plunge in Bitcoin is its anticipation of a liquidity crisis in the US dollar, as the BTFP is expected to not be extended in March. However, with the 10-year Treasury yield not dropping to the 2-3% range, small banks still have unrealized losses on their bond portfolios and significant liabilities on their balance sheets. Without the support provided by the government through the BTFP, these banks will not survive. This will trigger a small financial crisis and force the Federal Reserve to cut interest rates, reduce quantitative tightening, and/or resort to quantitative easing.

The ETF corrected from its approved high of $48,000 to $33,600. Therefore, Hayes believes that Bitcoin will find support between $30,000 and $35,000. The subsequent actions will depend on whether the BTFP is extended or not.

Currently, neither Federal Reserve Chairman Powell nor Treasury Secretary Yellen have mentioned the expiring BTFP in March. In the event of expiration, banks would have to repay nearly $200 billion in loans. Therefore, Hayes has purchased put options with a strike price of $35,000 expiring on 3/29 as a hedge and sold his positions in Solana and Bonk at a small loss.

If the BTFP is extended, Hayes will:
– Close existing options positions
– Sell Treasury bonds
– Buy Bitcoin at prices below $35,000
– Purchase Solana and meme coins WIF and Bonk

(
Solana surpasses $120, meme coins BONK and WIF gain traction
)

Arthur Hayes
BONK
BTFP
Solana
WIF
Bitcoin

Further reading:
Solana may release a second-generation smartphone at a lower price than Saga
Solana Developer Ecosystem 2023 Report: Uncovering the truth behind Solana’s rebirth