Former BitMEX CEO Arthur Hayes
“My prediction is that the market peaks in mid to late March, so this equates to a removal of $180 billion worth of liquidity due to QT from January to March.”
Hayes points to the Federal Reserve’s quantitative tightening (QT) policy, which involves reducing the size of its balance sheet by $60 billion per month. This tightening has resulted in the removal of significant liquidity from the financial markets. Hayes predicts that by mid-March 2025, this policy will have drained $180 billion from the market, contributing to the peak of the crypto market.
The downturn in 2022, according to Hayes, was a result of similar liquidity issues. When U.S. Treasury Secretary Janet Yellen issued shorter-dated coupon bonds in place of longer-dated ones, it drained more than $2 trillion from the Fed’s reverse repo facility (RRP). This reduced liquidity triggered declines in both crypto and stock markets, particularly affecting large U.S. tech stocks.
Despite the overall market correction expected in the second quarter of 2025, Hayes believes there’s a short-term bullish signal for Bitcoin. He explained that the U.S. Treasury would be spending down its general account (TGA) at the Federal Reserve, which would inject liquidity into the market, benefiting Bitcoin’s price in the short term. Hayes also predicts that the reverse repo facility (RRP) will see its balance drop from $1.237 trillion to zero by the end of Q1 2025, further boosting liquidity.
This surge in liquidity will likely come from money market funds (MMFs) withdrawing funds from the RRP to purchase higher-yielding treasury bills. This could add up to $237 billion into the market during the first quarter of 2025, which Hayes believes will fuel a final crypto market rally.
However, Hayes also expects a bearish factor that could affect the market in April: tax deadlines. With April being a significant tax month in the U.S., Hayes warns that these deadlines could pose a challenge for the crypto market, potentially contributing to a sharp correction after the March peak.
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