Arthur Hayes Says Fed Won't Cut Rates For Trump, Ignores Bitcoin – Bank Stress Is The Real Signal

In a recent podcast, Arthur Hayes said the Federal Reserve is unlikely to cut rates in March or any time soon until visible stress starts to appear in traditional markets.

• Hayes stated that the Federal Reserve will hold off on rate cuts until the regional bank index starts to crash and banks are bleeding 15% to 20% per session in the U.S. 
• According to him, Bitcoin is not a signal that the Federal Reserve recognizes as ‘real’ when it comes to market stress indicators.
• Hayes said that Bitcoin and crypto markets have already priced in a liquidity crunch, though policymakers do not treat them as indicators.

Maelstrom founder and chief investment officer Arthur Hayes said in a recent podcast that the Federal Reserve won’t cut interest rates in March, or anytime soon, until the cracks in the market begin to show.

“We know that there is a large percentage of Fed governors that hate Trump's guts. The last thing they're going to do is start lowering the rates,” Hayes said in a Milk Road podcast with LG Doucet. “The signal is, the regional bank index is down 45% – there are banks that are getting smoked 15% to 20% every session in the United States. That's the signal.”

"The signal is not Bitcoin, right? Because the Fed doesn't think Bitcoin is a real thing. "

– Arthur Hayes, Founder and Chief Investment Officer, Maelstrom

Bitcoin’s price edged 0.8% higher in the last 24 hours to around $74,500. On Stocktwits, retail sentiment around the apex cryptocurrency remained in ‘bullish’ territory over the past day as chatter rose to ‘normal’ from ‘low’ levels. 

Bitcoin Has Already Priced In Liquidity Crunch, AI Job Losses

According to him, Bitcoin’s price and the cryptocurrency market have already flagged a liquidity crunch in the market. Soon after Bitcoin’s crash, private credit markets have also come under stress, with firms like BlueOwl and BlackRock (BLK) hitting pause on withdrawal requests, citing liquidity stress.

He said that Bitcoin’s price has also priced in the job losses happening because of artificial intelligence (AI) as a “deflationary event,” while the equity markets have not yet recognized the contingent impact.  “We’re not there yet, but it’s going to come faster than people think,” he said. 

The Fed’s current narrative is based on AI being a productivity tool, which is why they can’t peg unemployment to AI acceleration. “Until you get the actual market stress related to an increase in AI-related job losses, the Fed cannot act,” Hayes said. 

Bitcoin continues to trade over 40% below its record high of over $126,000 seen in October last year, but has held up better than the equity market and gold amid the ongoing geopolitical clash between the U.S. and Iran. BTC’s price has gained 10% in the last 14 days and is up 8% over the past month.

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