Amid the ongoing debate about the recent Federal Reserve (Fed) interest rate cut, BitMax co-founder Arthur Hayes expressed concerns about the potential political implications of the Fed rate cut decision. Speaking at a crypto event in Singapore on September 18, Hayes speculated that the Fed’s decision could be aimed at influencing the upcoming U.S. elections.

Hayes expressed concerns that Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen may be using the rate cut to boost financial markets, possibly to benefit the Democratic Party in the upcoming election. 

He stated, “I have a macro view that Jerome Powell [Federal Reserve chair] and Janet Yellen [Treasury secretary] want to juice financial markets to help Kamala Harris win the election.”

On September 18, the Federal Reserve cut U.S. interest rates by 50 basis points with the plan for two more cuts this year followed by four more in 2025. Fed took an aggressive step mirroring long-held investors’ expectations. However, it has sparked concerns about the long-term impact of the Fed rate cut on both traditional and cryptocurrency markets. Hayes warned that the cut could lead to increased inflation and economic instability.

Hayes pointed out a disconnect between the rate cut and the current strength of the U.S. economy, which has shown strong GDP growth and historically low unemployment rates. Hayes criticized the Fed’s decision to make borrowing cheaper, arguing it contradicts the ongoing concerns over government spending.

Hayes blamed the Fed rate cut as an attempt to drive markets higher to make people feel wealthier as they headed to the polls in November, warning that inflation would likely accelerate after that point.

Crypto Markets Respond to Rate Cut

The cryptocurrency markets initially reacted positively to the Fed’s rate cut, with a 5% rise and Bitcoin hitting a three-week high of $62,500 on September 19. However, Hayes warned that this increase might only be temporary, predicting more significant market movements after traditional financial markets close on Friday.

Hayes noted that often the initial reaction in the crypto space is followed by more substantial shifts over the weekend, with the market either moving up or down depending on the performance of traditional markets.

Hayes also commented on the potential influence of the Bank of Japan’s upcoming rate decision on September 20. He suggested that a weaker yen could strengthen Bitcoin, while a stronger yen might put downward pressure on cryptocurrency prices in the near term.

Hayes Calls Fed Rate Cut Decision a “Colossal Mistake”

During his keynote speech in Singapore, Hayes sharply criticized the Fed for cutting rates while increasing the issuance of U.S. dollars and government spending. He referred to the decision as a “colossal mistake”. He argued that the current flow of money from U.S. treasury bills into higher-yielding reverse repos won’t benefit the crypto market as much as some might expect.

Hayes’s previous prediction of Bitcoin dropping below $50,000 marks his caution about future market volatility. He also hinted at a potential Bitcoin rally, suggesting that investors should stay alert for opportunities in the unpredictable market.

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