In anticipation surrounding Bitcoin’s fourth mining-reward halving on April 20th, investors are urged to brace themselves for potential market turbulence. Arthur Hayes, co-founder of BitMEX and Chief Investment Officer at Maelstrom, has raised concerns regarding a looming downturn in the digital assets market.

Halving Hype Meets Market Realities

Contrary to the prevailing bullish sentiment surrounding the halving event, Hayes suggests a different narrative might unfold. While historically the halving has been associated with substantial rallies in Bitcoin prices, Hayes believes this time might be different. He points out that when consensus leans heavily towards one outcome, market dynamics often veer in the opposite direction.

Market Factors at Play

Hayes identifies two significant factors that could exacerbate market volatility around the halving. Firstly, he highlights the coinciding U.S. tax season, with tax payments due on April 15th. This influx of tax-related transactions could drain liquidity from the market, prompting risk-averse behavior among investors.

Secondly, Hayes mentions the Federal Reserve’s quantitative tightening (QT) policies, which could further restrict dollar liquidity. This tightening of liquidity, combined with tax payments, could trigger a sell-off in crypto assets, as investors seek safer havens.

The potential liquidity squeeze could have broader implications for the cryptocurrency market, with Bitcoin likely to bear the brunt of the downturn. Despite rallying over 65% this year, reaching record highs above $70,000, Bitcoin’s upward trajectory may face obstacles in the coming weeks.

Hayes’ Recommendations and Outlook

In light of these market conditions, Hayes advises caution and restraint in trading activities until May. He suggests that after May 1st, with the Treasury likely to deploy measures to inject liquidity back into the market, conditions may become more favorable for risk assets.

Hayes anticipates a shift in market dynamics post-May 1st, with Treasury Secretary Janet Yellen expected to take action to bolster asset prices. This suggests a potential rebound in risk assets in the months leading up to the U.S. presidential election in November.