By
Godfrey Benjamin
July 4th, 2024
Hayes revealed that a weekend bailout could impact the price action of Bitcoin.
Bitcoin is still consolidating following the post-Bitcoin exchange-traded fund (ETF) hype. However, BitMEX co-founder Arthur Hayes believes a Bitcoin rally is imminent as New York Community Bank announces losses in its loans.
NYCB Suffers Massive Losses on Loan Reserves
The former BitMEX CEO and vocal analyst shared his theory on X (formerly Twitter) that the Federal Reserve, led by Jerome Powell and Treasury Department head Janet Yellen, could soon begin printing money.
Giving the rationale behind this, Hayes mentioned the recent ‘surprise’ losses announced by the New York Community Bank (NYCB) as the likely reason. He anticipates that the Fed and Treasury Department could initiate a bailout to cover NYCB’s loan loss reserves.
Jaypow and Bad Burl Yellen will be printing money very soon. $NYCB annc a "surprise" loss driven by loan loss reserves rising 10x vs. estimates. Guess the banks ain't fixed.
10-yr and 2-yr yields plunged signaling the market expects some sort of renewed bankster bailout to fix… pic.twitter.com/k0Ieq2jKPK
— Arthur Hayes (@CryptoHayes) January 31, 2024
According to NYCB, its loan loss exceeded ten times its estimates. This situation has plunged the bank into a crisis, with several customers looking to withdraw their funds. Offering more clarity on the issue, Hayes stated that 10-year and 2-year estimated yields plunged significantly, indicating the financial market expects some renewed banker bailouts to fix the issue.
Usually, the financial tool employed by the Fed is the Bank Term Funding Program (BTFP), which issues new loans to cover any banking shortfall.
However, in a press release dated January 24, 2024, the Fed announced that the BTFP will cease approving new loans by March 11.
This will also impact potential short-term liquidity reserves financial institutions usually tap into during periods of dire scarcity. The co-founder highlights that BTFP and the discount window won’t absorb NYCB’s losses since multi-family resolution loans and CREs aren’t eligible collateral for BTFP’s operational liquidity.
Given this, the NYCB and a few other distressed banks could dump into the weekend, prompting immediate bailout from the apex US bank and the Treasury Department.
Bank Bailout, a Perfect Springboard for Bitcoin Rally?
Continuing his projection, Hayes revealed that a weekend bailout could impact the price action of the foremost crypto asset, Bitcoin.
According to the BitMEX exchange founder, the BTC price could dip a bit. After this brief bearish run, Bitcoin could catch major tailwinds and imitate the price action of March 2023.
While the Bitcoin asset was created to operate outside the traditional financial landscape, the cryptocurrency has been influenced by macroeconomic measures in the past couple of years. An adverse financial outlook often leads to a slight dip in the price of Bitcoin before a comeback resurfaces.
According to Coinmarketcap data, Bitcoin is trading at $42,160 at press time, down 1.18% in the last 24 hours. Meanwhile, the asset’s seven-day trading action remains bullish, with the digital asset up 5.31% in the past week. While the broader crypto market has slumped by 1.38%, the forthcoming Bitcoin halving event could help in a prolonged bull run.
Photo: CoinMarketCap