- Arthur Hayes tells portfolio companies to launch their tokens.
- The call comes after multiple central bank interest rate cuts this week.
After calling a crypto market lull in April and May, BitMEX co-founder Arthur Hayes says now is the time for new crypto projects to launch their tokens.
In his latest essay about how economic conditions will affect the crypto market, Hayes recounted how many portfolio projects of his venture firm recently asked him whether they should launch tokens.
His answer? A resounding yes.
“The trend is clear,” Hayes said, pointing to interest rate cuts from the Bank of Canada and the European Central Bank. “Central banks at the margin are starting easing cycles.”
Interest rate cuts make borrowing cheaper, which tends to drive investors toward riskier assets.
When optimistic investors send crypto prices higher, projects rush to launch tokens to capitalise on the favourable market conditions.
Hayes’ family office runs a crypto venture firm called Maelstrom Capital. The firm lists a portfolio of over 20 crypto startups.
While some of these companies have already launched tokens, others, such as Elixir, have not, despite running a months-long points campaign — often a signal that a crypto project is planning to launch a token.
Investors tire of tokens
There are reasons projects may still want to hold off on launching their tokens.
DeFi users have pushed back against projects that employ what many call predatory “low float high FDV” token structures that benefit early venture investors.
Fully diluted valuation — or FDV — refers to the total value of a token’s supply, including those locked or yet to be distributed, and not just those that are circulating.
As a result, many new tokens have plummeted on launch, signalling a lack of investor demand.
A macroeconomic shift
Still, investor fatigue could be quickly forgotten with a swift change in economic conditions.
Hayes pointed to recent rate cuts from The Bank of Canada and The European Central Bank as an indication that macroeconomic conditions are shifting faster than he anticipated.
“I thought the fireworks would start in August,” he said.
Hayes, however, held off on predicting an immediate rate cut from the Federal Reserve.
Still, the likelihood of rate cuts in the US jumped.
Neil Wilson, chief analyst at Markets.com, said weaker-than-expected US economic data sent the odds of a rate cut in September to 70%.
The reaction was swift.
On June 4, US spot Bitcoin exchange-traded funds saw the largest one-day investment since March 12.
The battle for the yen
Hayes previously outlined why he believes a weakening Japanese yen will send crypto prices higher.
To help prop up the yen’s value, the Fed could create new dollars and swap them for yen with the Bank of Japan. This would allow Japan’s Ministry of Finance to buy up yen on foreign exchange markets, increasing its value.
Hayes argues this so-called money printing is good for risk assets — including crypto.
Hayes pointed to another way to narrow the gap between the yen’s value and those of other currencies.
Interest rates in Japan are much lower than in the US and Europe. This devalues the yen as traders sell it for other currencies with higher interest rates.
To combat the yen selling, central banks with high interest rates could lower them to make this trade less appealing.
However, lowering interest rates also risks stoking another wave of inflation.
Hayes’ bets
Hayes said he’ll divulge his strategy in due course.
“It is time to deploy it again on conviction shitcoins,” he wrote. “Of course, I’ll tell readers what those are after I have purchased them.”
“But suffice it to say, the crypto bull is reawakening and is about to gore the hides of profligate central bankers.”
Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.
