Arthur Hayes: Terra Collapse Was “Preordained”

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  • Arthur Hayes has suggested that the Terra collapse was “preordained” due to its design
  • Hayes added that the collapse merely preempted a collapse that would have happened anyway
  • The BitMEX co-founder revised his Bitcoin bottom price up to $25,000-$27,000

Arthur Hayes has claimed in a new blog post that the collapse of Terra was “preordained” because of how the system had been designed. In a piece that ranged in topic from the Federal Reserve’s actions in tackling inflation to Big Mac-eating competitions, Hayes opined that Bitcoin’s collapse to the $26,000 mark would have happened anyway and that the Terra collapse merely exacerbated what was coming. He also revised his opinion of Bitcon’s bear market low from $20,000 to $25,000-$27,000, and offered a three-pronged approach to determining the depth of the bear market.

VC Firms Added to Terra Collapse

Hayes’ analysis of the Terra collapse connected two theories: the “inflation-driven contraction of VC balance sheets” and the popping of the LUNA bubble. The Federal Reserve was indirectly responsible for the collapse of Terra, Hayes says, because its actions precipitated action by VC firms, although he put the actual blame on Terra’s design:

For the record, I’m not blaming the Fed for the collapse of TerraUSD. Its collapse was preordained because of how it was programmed. That information was fully available to anyone who read the whitepaper and/or researched the bleak history of algorithmic stablecoins.

Hayes ‘Bottom’ Checklist Coming True

In the piece, Hayes also offered his ‘bottom checklist’:

  • Bitcoin and Ethereum move in an increasingly less correlated fashion versus the Nasdaq 100
  • Price levels get “very close” to the previous cycle’s all-time highs
  • Mainstream media “gloats” about crypto collapse and laughs at those who “attained short-lived wealth investing in crypto.”

So how close are we to Hayes’ predictions? He suggests that the recent Terra-inspired selloff saw crypto decouple from the “broader risky asset universe”, while the collapse itself saw the Bitcoin price hit just $5,000 off the prior high of $20,000.

As for the mainstream media angle, Hayes doesn’t give his opinion on this, but some quick research shows that the typically critical outlets are still finding individuals who lost it all in the LUNA crash and making hay from their stories of disaster.

According to Hayes’ predictions we still have at least another quarter to navigate, and possibly two, before the crypto markets start to show signs of life again. That’s a lot of time to pick up some bargains.