Bitcoin’s recent drop has left traders searching for answers. But according to Arthur Hayes, the reason has little to do with crypto itself.
The former BitMEX CEO says the weakness in Bitcoin is tied to something much bigger – a sharp drain in U.S. dollar liquidity happening behind the scenes.
In a post on X, Hayes pointed to a sudden tightening in dollar liquidity over the past few weeks.
“Roughly $300bn fall in $ liq over past few weeks driven mostly by $200bn rise in TGA, gov could be raising cash balances to fund spending in case of shutdown. $BTC falling not a surprise given the fall in $ liquidity,” he wrote.
His message was clear: Bitcoin is reacting to macro conditions, not a crypto-specific problem.
Hayes highlighted the role of the U.S. Treasury General Account (TGA), the government’s main cash account held at the Federal Reserve.
When the Treasury increases its TGA balance, money is pulled out of the financial system. In recent weeks, the TGA has risen by around $200 billion, removing liquidity that would otherwise flow through markets.
Hayes suggested the government may be building cash reserves to prepare for a possible shutdown, allowing federal spending to continue if budget talks break down.
The tightening is visible in market data. The USDLIQ index, which tracks broad dollar liquidity, has fallen nearly 7% over the past six months. It dropped from highs near 11.8 million in August to around 10.88 million by late January.
Bitcoin’s pullback has closely followed that trend, reinforcing the link between liquidity conditions and crypto prices.
Historically, periods of rising TGA balances and shrinking liquidity have weighed on risk assets, including stocks and cryptocurrencies. When liquidity expands, those assets tend to perform better.
The liquidity squeeze isn’t hitting Bitcoin alone. Reduced liquidity often leads to lower leverage, higher risk aversion, and selling across speculative assets.
With futures open interest falling and capital rotating toward traditional safe havens like gold and silver, the broader message from Hayes is simple: until dollar liquidity improves, Bitcoin and other risk assets may continue to struggle.
For now, macro cash flows are setting the tone.
Bitcoin’s decline is linked to a sharp fall in U.S. dollar liquidity, not issues within the cryptocurrency market itself.
When the Treasury increases its cash in the TGA, liquidity drains from markets, putting pressure on Bitcoin and other risk assets.
Yes, historically, expansions in liquidity support risk assets like Bitcoin, potentially boosting prices and market confidence.
Yes, reduced liquidity impacts stocks, crypto, and speculative assets, while capital often shifts toward safe havens like gold.
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