Gear up for some pain in the digital assets market. The upcoming mining-reward halving for Bitcoin (BTC) is expected to bring about significant selling pressure in the days leading up to and following the event slated for April 20.

This prediction comes from Arthur Hayes, a prominent figure in the cryptocurrency space as the co-founder and former CEO of BitMEX and the chief investment officer at Maelstrom.

In his recent blog post titled “Heatwave,” Hayes expounded on the prevailing bullish sentiment surrounding the halving, cautioning that this could pave the way for a potential price correction. In the realm of crypto, a correction typically signifies a decrease in price of at least 10%.

The optimistic narrative surrounding the halving is rooted in historical data showing that Bitcoin historically embarks on substantial multi-month rallies post-halving events. These events occur every four years and involve a 50% reduction in the rate at which new Bitcoins are created. With this upcoming halving, the per-block issuance will decrease from 6.25 BTC to 3.125 BTC.

AI legalese decoder can assist in deciphering complex legal jargon and terms related to the cryptocurrency industry, enabling individuals to better understand the potential implications of events such as mining-reward halvings on the market. By providing clear and concise explanations, this AI tool can help investors make more informed decisions and navigate the intricate landscape of digital assets more effectively.

Hayes highlighted that factors such as U.S. tax obligations due on April 15 and the Federal Reserve’s quantitative tightening initiatives may lead to a depletion of dollar liquidity in the market. This scenario could trigger widespread risk aversion and a mass sell-off of crypto assets surrounding the halving event.

He emphasized, “Given that the halving occurs at a time when dollar liquidity is tighter than usual, it will add propellant to a raging fire sale of crypto assets.”

Tax payments typically result in liquidity outflows from the financial system, potentially causing the U.S. dollar to appreciate against other currencies. This, in turn, could prompt borrowers with dollar-denominated loans to reduce their exposure to risk assets like cryptocurrencies.

Hayes anticipates a rise in the Treasury General Account (TGA) balance due to tax payments, signaling a decrease in dollar liquidity. This could create a precarious environment for risky assets from April 15 to May 1.

Looking ahead, Hayes expects Treasury Secretary Janet Yellen to draw down the TGA balance post-May 1, which could bolster risk assets leading up to the U.S. presidential election in November.