Despite the efforts of crypto fans to create a counter-narrative, Bitcoin is highly correlated to the Nasdaq 100 and if the NDX tanks, it will take crypto down with it, writes crypto pioneer and BitMEX co-founder Arthur Hayes.
Hayes predicts that by the end of the second quarter, Bitcoin will have tested at $30,000. Bitcoin first hit $30,000 on Jan. 2, 2021. By November 2021, it hit an all-time high of more than $68,000. Bitcoin was trading at $40,602.54 as of this writing, up 1.07 percent in the last 24 hours.
The sorry state of global stock markets could lead to a crypto crash in the second quarter, and Hayes is protecting himself by buying put options.
“I am buying crash June 2022 puts on both Bitcoin and Ether,” Hayes wrote in an April 10 blog post.
Hayes said he predicts “coming crypto carnage” within a few months — a bearish view from a man whose crypto trading and derivatives platform claims to be the most advanced in cryptodom.
A former equities trader for Citigroup Inc. in Hong Kong, Hayes co-founded the Seychelles-based BitMEX in 2014. While he remains bullish on crypto prices over the long term, he sees crypto as teetering on the edge of a “calamitous outcome.”
“Even though some of these coins are already down 75% from their all-time high, I don’t believe even they can escape the coming crypto carnage,” Hayes wrote.
Crypto is moving in tandem with U.S. technology stocks and the Russian invasion of Ukraine is going to hurt them both, he wrote, due “to softening global demand driven by commodity price inflation from the Russian / Ukraine conflict.”
Hayes also argued that while interest rates are rising in response to inflation, falling interest rates tend to support the Nasdaq 100.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
Hayes admitted there’s a chance he could be wrong.
“That is fine — in that case I only lose the option premium paid on my crash protection,” Hayes wrote. “I will be wrong if the correlation between Bitcoin / Ether and NDX starts dropping before a crash in risk asset markets. I’m perfectly okay with that outcome, as I’m already in a long crypto position.”
In his blog, Hayes offered a range of charts to show the correlation between crypto and traditional markets to back up his argument. Looking at the chart for the Nasdaq 100, Hayes said that the tech index failed to bounce significantly on a key technical level, suggesting it may go lower.
Photo: Arthur Hayes, co-founder of BitMEX (Bloomberg / Getty)