Arthur Hayes Explains Why Fed Rate Cuts May Not Boost Bitcoin Prices

Arthur Hayes, the co-founder and former CEO of BitMEX, has shared his perspective on why upcoming interest rate cuts by the U.S. Federal Reserve may not significantly impact Bitcoin prices. On September 2, in a post on X, Hayes pointed out that despite Federal Reserve Chair Jerome Powell’s strong hints about a rate cut in his Jackson Hole speech on August 23, Bitcoin’s price has struggled and even declined.

Following the speech, Bitcoin briefly surged to $64,000 but then fell by 10%, reaching a low of $57,400 on September 2. It has since recovered slightly, trading at $59,238 as of September 3.

Hayes attributes this price movement to reverse repurchase agreements (RRPs), which offer a 5.3% return, higher than the 4.38% yield on Treasury bills. This difference has led large money market funds to shift their cash from Treasury bills into RRPs, thereby reducing liquidity for higher-risk assets like Bitcoin.

An X account called “ELI5 of TLDR” further explained that the RRP program acts like a temporary cash holding for major banks and money managers, offering higher returns than other safe investments, which keeps capital locked in these “parking lots” rather than circulating through the broader economy.

Since the Fed hinted at a potential rate cut, approximately $120 billion has flowed into RRPs. Hayes emphasized that this shift contradicts the widely held belief that lower interest rates benefit risky assets like Bitcoin. Many expect that low rates encourage borrowing, spending, and liquidity, making interest-bearing accounts less appealing and giving Bitcoin an advantage.

According to the CME Fed Watch tool, there is a 69% probability of a 25-basis-point rate cut and a 31% chance of a 50-basis-point cut during the Federal Reserve’s meeting on September 18. A more aggressive rate cut could lead to a stronger market reaction and an uptick in economic activity.