Arthur Hayes, former CEO of BitMEX, released bold predictions for the cryptocurrency market, predicting a peak in mid-March 2025, followed by a severe correction.
He bases his prediction on an analysis of the liquidity dynamics of the US dollar and its impact on global financial markets, particularly crypto.
The role of the US Treasury as Bitcoin price follows the Fed’s RRP
Hayes’ analysis centers around two key components of dollar liquidity: the Federal Reserve’s Reverse Repurchase Facility (RRP) and the U.S. Treasury General Account (TGA). He notes that since Bitcoin bottomed in the third quarter (Q3) of 2022, its price has largely followed the RRP decline. According to him, this reflects increased liquidity in the market.
“As we enter 2025, the question on crypto investors’ minds is whether the Trump pump can continue,” Hayes wrote in his latest essay, The truth about Trump.
The co-founder of Bitmex recognizes the risk of market disappointment. He discusses possible delays in the implementation of pro-crypto policies under the Trump administration. He believes that the current liquidity environment for the dollar remains favorable.
The Fed’s quantitative tightening (QT) policy, which is reducing its balance sheet by $60 billion per month, will remove $180 billion in liquidity by the end of the first quarter of 2025. However, the recent adjustment of the RRP rate by the Fed is expected to lead to a $237 billion decline. billion in liquidity injections. This would offset the impact of QT and generate positive net liquidity of $57 billion.
Hayes highlights Treasury’s critical role in tackling the debt ceiling, with Treasury Secretary Janet Yellen planning to implement “extraordinary measures” to fund government operations between January 14 and 23. This approach will reduce the Treasury General Account (TGA), currently at $722. billion, temporarily increasing liquidity as new debt issuance stops until Congress raises the debt ceiling.
Based on historical spending patterns, Hayes predicts the TGA could be 76% depleted by March. It should be noted that this corresponds to the expected peak of the market.
Hayes increases risk, cites external factors
Although dollar liquidity is central to his analysis, Hayes cautions that other macroeconomic factors could influence cryptocurrency prices. These include potential changes in China’s credit policies, adjustments by the Bank of Japan and unexpected moves by the Trump administration.
Nonetheless, Hayes remains confident in the calculations that support his liquidity-focused forecasts. He highlights the correlation between the decline in the RRP and the surge in Bitcoin prices since the end of 2022. These, he says, demonstrate the dominant role of liquidity.
As part of its strategy, Hayes plans to increase risk exposure by investing in decentralized science (DeSci) projects. Maelstrom, the investment fund he runs, has acquired tokens such as BIO, VITA, ATH, GROW, PSY, CRYO and NEURON. The investments signal a bet on DeSci’s emerging narrative.
The release reiterates its willingness to embrace high-risk, high-reward opportunities. His enthusiasm reflects a broader trend of investors seeking niche sectors with transformative potential. Nonetheless, Hayes acknowledged past forecasting errors while emphasizing the importance of adjusting strategies based on new data.
For now, Arthur Hayes is optimistic about the near-term outlook for the crypto market. He nevertheless recommends caution at the end of the first quarter, signaling a strategic withdrawal as dollar liquidity conditions tighten in the second quarter.
“Sell at the end of the first quarter, then relax,” he advises.
Overall, Hayes’ liquidity-focused analysis offers a compelling roadmap for crypto investors in an uncertain macroeconomic environment. While the promise of a peak in mid-March is enticing, his call for caution reflects the volatility inherent in the cryptocurrency market.
Hayes’ prediction matches predictions from data analytics provider CryptoQuant. A contributor, Crypto Dan, recently pointed out that the ongoing bull market, which began in January 2023, could peak in the first or second quarter of 2025. Dan’s analysis suggests that 36% of Bitcoins traded during the fourth quarter of 2024 were held for less than a month. , mimicking patterns seen at previous market highs.
“With a significant influx of new investments as well as additional funds from existing investors, it is reasonable to expect that the market is now in the latter stages of this cycle,” the message read.
Despite this, it indicates that significant gains in Bitcoin and altcoins remain possible before the market corrects. Crypto Dan urges caution in a maturation cycle.
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