- Former Bitmex CEO Arthur Hayes expects a significant increase if the merger is successful; therefore, he is not planning a “sell the news” event.
- In the latest writings on his Medium Blog, “Eth-Flexive” and “Max Bidding”, Arthur Hayes argues that Ethereum will have a rally similar to Bitcoin’s halving, based on current network usage.
Former Bitmex CEO Arthur Hayes, who previously claimed he would buy Bitcoin at $20,000 and Ethereum at $1,300, now reports that he is maxing out Ethereum at current prices. In his latest blog post, “Eth-Flexive”, Arthur Hayes confirms that he expects a significant increase in Ethereum’s price should the merger be successful. He also stated that the “buy the rumor, sell the news” phenomenon will not occur after the merger. According to Hayes, everyone who can sell their crypto has already sold, and this is due to intense downward price movement over the past month.
Inspired by George Soros’ “Theory of Reflexivity”
Arthur’s latest blog post centers around George Soros’s “Theory of Reflexivity”, taken from the book “Alchemy of Finance”, which is based on the idea that there is a feedback loop between market participants and market prices. In simpler terms, the theory explains that market participants often play a significant role in creating the future they speculate on, creating a self-fulfilling prophecy.
The spot market
Hayes describes the spot market’s current opinion on the merger in more detail by looking at the ETH/BTC chart. As Ethereum outperforms BTC and has outperformed by 50% since the last crypto credit unwind, Hayes confirms that the market’s belief in a successful merger is growing more.
The futures market
The futures chart, however, illustrates a slightly different story. The entire curve out to June 2023 on Open Futures Interest is traded in backwardation, meaning that the market predicts that ETH’s price by the maturity date will be lower than the current spot price. This may be due to market participants using ETH futures as a hedge against their long spot exposure to Ethereum.
Merge scenario predictions according to Hayes
If the merger happens, according to Hayes, his prediction is as below:
“If the merger is successful, there is a positive reflexive relationship between the price and the amount of currency deflation. Therefore, traders will buy ETH today, knowing that the higher the price goes, the more the network will be used and the more deflationary it will become, drive the price higher, get the network used more, and so on and so forth. This is a virtuous circle for bulls. The ceiling is when all of humanity has an Ethereum wallet address.”
If the merge doesn’t happen on the other side:
“If the merger fails, there will be a negative reflexive relationship between the price and the amount of currency deflation. Or, to put it another way, there will be a positive reflexive relationship between the price and the amount of currency inflation. Therefore, in this scenario, believe I think traders will either go short or choose not to own ETH.”
What will happen after the merger?
Ethereum’s merge date has been discussed by the core development team and should happen before the end of September. The Ethereum Merger is one of the most anticipated events in Ethereum history. Once the transition from Proof of Work to Proof of Stake is achieved, Ethereum should undergo the following scenarios:
- Ethereum will undergo a 90% cut in daily emissions
- Annual inflation will drop from 4.3% to 0.43%, equivalent to three Bitcoin halvings at once
- Proof of Stake Validator rewards will go up from 4.5% to 10-15% in the months after the merge
- Energy consumption will fall by 99.9%.
Arthur Hayes states that he believes DeFi will offer a credible alternative to the current financial system as Ethereum becomes a deflationary currency, usage increases and DeFi gains in popularity, which should further increase the rate of deflation.
Arthur Hayes confirms that he will not reduce his position into or immediately after the merger; if anything if the market sells off before the merge he will add to his Ethereum position.