Although the liquidity situation in financial markets will remain “brutal” for the next 6 to 12 months, the “planting season” for asset allocators is now, before central banks bring their droplets of liquidity, the former BitMEX CEO, Arthur Hayes, wrote in a new essay.
It is during this “brutal” period that “we shall discover what multiple the market ascribes to what the faithful believe is game-changing tech,” Hayes said in his analysis of the current market conditions, titled Floaters.
He went on to warn that although liquidity has to a large extent dried up, and many cryptoassets are trading at prices far below their highs from last year, the selling may not be over yet.
“This game-changing tech previously commanded a very high price-to-metrics ratio. For the foreseeable future, that ratio will be sliced and diced to unimaginably low levels,” the crypto essayist wrote.
But despite the current bearishness in the market, which he argued could last for a while, Hayes stated that he has not lost faith in the long-term potential of what he called the “critical [decentralized finance] DeFi verticals that are on sale right now.”
Still, the former BitMEX boss warned that it will not be a straight line higher even for the highest-quality DeFi tokens, and said is likely they will get “smacked” again, possibly falling “another 50% or more.”
For allocators of real assets, however, “this is planting season,” Hayes wrote, adding:
“Once the rainy season, filled with phat droplets of central bank liquidity, begins, then it becomes difficult again to procure desirable projects at reasonable valuations.”
Also, he said that he “would be even more excited to own the premier [decentralized exchanges], exchanges that enable the tradability of human culture, and one of the backbones of a decentralized internet.”
Meanwhile, Hayes admitted in the essay that his recent prediction for a bottom for bitcoin (BTC) of USD 25,000 to USD 27,000 and for ethereum (ETH) around USD 1,700 to USD 1,800 “proved to be extremely optimistic.”
“When it comes to calling the market, I get it wrong more than I get it right. That’s the difference between writing essays and investing,” Hayes wrote.