dailyhodl.com
BitMEX co-founder Arthur Hayes is highlighting a key support level that should concern traders and investors who have placed long positions on Bitcoin (BTC).
In a new blog post, Hayes says that Bitcoin bulls should be “worried” about the $17,500 price level, an area that marks the current bear market low for BTC.
The former BitMEX CEO says that Bitcoin’s performance will likely be determined by the US dollar liquidity index, a metric that tracks the quantity of US dollars in the system through the size of the Fed’s balance sheet, Fed’s reverse repo facility and balance of the US Treasury general account with the New York Fed.
“As we watch the gyrations of the USD liquidity index and its impulse, the Bitcoin level that longs should be worried about is $17,500. The most likely course of action is a re-test of that low. Whether it holds the line or not is entirely dependent on the trajectory of the USD liquidity index’s impulse.”
According to Hayes, the Fed’s commitment to reducing its balance sheet and the US Treasury’s inclination to issue more debt to fund the government take away liquidity from the system, which he notes does not bode well for BTC.
At time of writing, Bitcoin is changing hands for $19,164.
Turning to Ethereum (ETH), Hayes says that the second-largest crypto asset by market cap will likely outperform Bitcoin.
However, the crypto capitalist says Ethereum is unlikely to hit a price of at least $10,000, as he had predicted earlier this year if monetary tightening continues in the US.
“I remain confident that the structural reduction in the supply of ETH will definitely lead to an outperformance against Bitcoin — but if the Fed and Treasury continue with their USD liquidity reduction plans, I have little confidence in ETH’s ability to get to Five Ducking Digits by year-end.”