Arthur Hayes says the Fed’s rate cut has a short-term benefit

BitMEX co-founder Arthur Hayes recently published an article titled “Sugar High,” highlighting the short-term effects of the Federal Reserve’s potential interest rate cut.

Hayes also highlighted that assets like Bitcoin will likely benefit from a liquid global financial market that can come from inflation.

The Japanese yen could disrupt the US financial market

In a keynote address on August 23, Fed Chairman Jerome Powell hinted that interest rates would be cut in September, citing a considerable cooling in the labor market “from its previously overheated state.”

This move, often seen as good news for consumers, leads to lower interest rates on mortgages, credit cards and car loans, making it easier to borrow and spend. The Fed aims to avoid recession and stimulate the economy and employment by cutting rates. Recall that US Senator Elizabeth Warren once called for interest rate cuts because it made it harder for Americans to pay their rent.

Hayes argued that a tilt toward cutting tariffs would only have short-term benefits, similar to how sugary processed foods can provide a short-term energy boost. The crypto enthusiast called for a rate hike as he had a long-term gain in economic performance.

“The Fed is getting the sugar rate cut high before the famine hits. From a purely economic perspective, the Fed should be raising rates, not cutting them,” he wrote.

Hayes also highlighted how Powell’s announcement on Friday affected the Japanese yen. The interest rate cut narrows the interest rate gap between the US dollar and the yen, thereby causing the latter to appreciate. The BitMEX co-founder warned that the rising yen could put pressure on global markets, especially dollar-denominated assets, which could lead to market turbulence.

Impact on crypto assets

While Hayes advocates a rate hike, an interest rate cut could send crypto assets like Bitcoin to incredible heights as Americans have more money to spend.

However, the crypto advocate expressed optimism that a liquid environment in the global financial market could benefit Bitcoin and other cryptocurrencies.

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