PANews reported on January 7 that Arthur Hayes, co-founder of BitMEX, explained in his latest blog post why he believes the crypto market will peak in mid-March and then experience a severe correction. The article stated that Bitcoin bottomed out in the third quarter of 2022 when the Fed's reverse repurchase tool peaked; Yellen adjusted the bond strategy and withdrew more than $2 trillion from RRP, injecting liquidity into the market and driving cryptocurrencies and stocks up. In the first quarter of 2025, the market is concerned about whether the US dollar liquidity can offset the impact of the slow implementation of Trump's policies. If liquidity is sufficient, increasing risk exposure will be a safe choice.
First, the article discusses the Federal Reserve, which is a secondary consideration in this analysis. Then, the article discusses how the U.S. Treasury will deal with the debt ceiling. The focus is on how the Treasury will deal with the debt ceiling. If politicians hesitate, the Treasury may inject liquidity from the general account (TGA) to create a positive atmosphere for cryptocurrencies. The Fed's quantitative tightening policy continues, but the RRP scale is almost zero, and the RRP interest rate is lowered to reduce attractiveness. This move is intended to boost demand for US bonds and pave the way for policies such as stopping QT. Yellen revealed that the Treasury expects to take "extraordinary measures" to raise funds in mid-January. When politicians agree to raise the debt ceiling, it will test Trump's support. It is expected that the balance of the Treasury's general account (TGA) will be exhausted in May-June, and the market may react in advance. As of the end of the first quarter, the total dollar liquidity of the Federal Reserve and the Treasury is expected to be $612 billion. When the default and shutdown crisis approaches, an agreement will be reached to raise the debt ceiling, and the Treasury will resume borrowing and replenish TGA, resulting in a decrease in liquidity. After the tax payment deadline on April 15, the government's financial situation will improve and liquidity will also decrease. If TGA balances dominate cryptocurrency prices, the market may reach a high at the end of the first quarter and then fall back.
Yellen lowered the rate to issue short-term Treasury bills, causing Powell's strategy of tightening financial conditions to fight inflation to fail. Although the Trump team may perform poorly on cryptocurrencies and corporate legislation, the positive dollar liquidity environment may offset this impact. Hayes said: "Investors are advised to sell in the late first quarter and wait for liquidity conditions to improve in the third quarter. As the chief investment officer of Maelstrom, it is recommended that risk takers switch to aggressive mode and get involved in the decentralized science (DeSci) altcoin field. Maelstrom has purchased BIO, VITA, ATH, GROW, PSY, CRYO, and NEURON. If things go well, I will reduce my baseline position in March."
