Arthur Hayes, the co-founder of BitMEX, predicted that Bitcoin would experience a rally that would peak in late March.
He attributes this potential surge to the Federal Reserve’s quantitative tightening (QT) and liquidity measures.
In an essay published on January 7, Hayes discussed how these economic policies could impact risk assets, including Bitcoin, in the first quarter of 2025.
The Federal Reserve plans to withdraw $180 billion through quantitative tightening (QT) between January and March. However, Hayes pointed out that changes to the Reverse Repo Program rate could inject $237 billion into the economy as funds move to higher-yielding Treasury bills. This would lead to a net liquidity increase of $57 billion for the first quarter.
The U.S. Treasury’s General Account (TGA) Janet Yellen, dubbed “Bad Gurl Yellen” by Hayes, has implemented “extraordinary measures” to fund government spending while awaiting a debt ceiling increase. The TGA is expected to be depleted by May or June, which may increase short-term liquidity. However, a future debt ceiling increase could tighten financial conditions when the TGA is replenished.
Hayes anticipates liquidity shifts will drive a market rally, with Bitcoin potentially peaking in mid to late March 2024, reaching around $73,000. However, after Q1, the market may experience pressure due to tax deadlines and the TGA’s replenishment. He speculates the Fed might run out of policy tools, halting QT or resuming easing. Favourable liquidity in early 2025 could boost temporary gains for Bitcoin and other risk assets.
In an interview with Channel News Asia, Hayes expressed doubt about former President Trump’s support for Bitcoin, highlighting the absence of pro-crypto policies during his administration. He suggested that Trump’s potential re-election in 2025 might not lead to favourable regulations for Bitcoin as their economic policies could raise U.S. debt and inflation, making Bitcoin and cryptocurrencies more attractive as alternative assets.
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