Amidst the sharp rise in Bitcoin prices that the market witnessed after Donald Trump’s victory in the US presidential election, Arthur Hayes, the co-founder of BitMEX, came out with a controversial prediction. According to Hayes, January 20, 2025, which coincides with Donald Trump’s inauguration day, could witness a major collapse in the cryptocurrency market.

Bitcoin: Big Rise Ahead of 'Political Shock'

Since Donald Trump’s victory was announced, Bitcoin has surged, driven by positive expectations from the crypto community. The market has been promised unprecedented regulatory moves and government support, such as the possibility of creating a strategic reserve of Bitcoin. However, Arthur Hayes, co-founder of BitMEX, believes that this enthusiasm may be short-lived, explaining:

“Donald Trump has a full year to show progress on some of his goals to help Republicans maintain control of the House and Senate.”

Hayes sees Bitcoin as having entered a “buy the rumors and sell the news” cycle, a phenomenon that occurs when markets react positively to future expectations. But they correct sharply once reality sets in. Trump’s promises of pro-Bitcoin policies could run into political and economic challenges that make them unlikely to be implemented in the near term.

Jerome Powell changes his stance, the dollar and gold in the equation

Among the news supporting Hayes’ analysis are statements by Jerome Powell, the chairman of the US Federal Reserve, who recently described Bitcoin as “digital gold.” But he stressed that the Federal Reserve “has no right to own Bitcoin.”

Although Senator Cynthia Lummis has suggested that any strategic reserve of Bitcoin would be under the supervision of the US Treasury, this proposal, according to Hayes, would not be a top priority for the new administration at this stage.

Hayes suggests that the Trump administration may seek a “quick win” by sharply devaluing the dollar against gold. He believes this strategy would be more effective in the short term than focusing on Bitcoin, which would require building a complex legislative and regulatory infrastructure.

“The Treasury Department under Scott Bessent does not have time to deal with creating a strategic reserve of Bitcoin. A devaluation of the dollar against gold is the fastest path to tangible results.”

Also, according to Hayes’ analysis, Trump’s inauguration day could be a major turning point for the market. As investors realize the scale of the challenges facing Bitcoin and the lack of rapid progress on political promises, the market could see a sharp correction. He also sees the “reality shock” causing the market to “sleep” temporarily. Investors will enter a state of anticipation and caution.

Heat shock to the market?

While Bitcoin continues to make significant gains at the moment, Hayes warns that these gains may be unsustainable if they are not accompanied by real regulatory steps or government policies that support the market. With Bitcoin’s sharp rise, any correction that comes could be painful and impactful in the short term.