Arthur Hayes, a prominent investor in digital assets and former CEO of BitMEX, predicts a strong crypto market rally in the first quarter of 2025, with a potential peak in “mid to late March.” In his recent essay titled “Sasa,” Hayes explores various macroeconomic factors such as US Federal Reserve (Fed) policy, US Treasury General Account (TGA) balances, the Fed’s Reverse Repo Facility (RRP), and political uncertainty in Washington.
He starts by drawing a parallel between risky backcountry conditions in Japan’s Hokkaido ski resorts due to inadequate snow cover and potential market challenges that could hinder crypto rallies. Despite the metaphorical dumping of liquidity to drive up digital asset prices, Hayes cautions against unforeseen risks stemming from the US political and fiscal landscape.
Insights into the Potential Peak in March
Hayes notes that the optimism surrounding President Donald Trump’s second term may set the stage for market disappointment due to high expectations for policy actions. However, he believes that any negative impact could be offset by a significant dollar liquidity boost.
Emphasizing the importance of the Fed’s RRP on Bitcoin’s price trajectory, Hayes highlights its positive correlation with crypto and equities prices since the third quarter of 2022.
He explains how the change in the policy rate of the RRP, along with ongoing quantitative tightening, could inject a substantial amount of liquidity into global markets. Additionally, Hayes explores the role of the Treasury General Account in releasing liquidity amid debt ceiling negotiations.
With estimates suggesting a potential increase in dollar liquidity of up to $612 billion in the first quarter, Hayes predicts March as a critical period when liquidity surge may start to diminish, potentially impacting market expectations.
Reflecting on the historical context and Bitcoin’s price action in 2024, Hayes underscores the importance of RRP and TGA mechanics as near-term indicators, despite potential disruptors like Chinese credit expansion or changes in interest rate policies.
He concludes by advising investors to consider selling opportunities in the first quarter and await improved liquidity conditions later in the year. At the time of writing, Bitcoin was trading at $101,344.
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