PANews reported on January 7 that BitMEX co-founder Arthur Hayes explained in his latest blog post why he believes the cryptocurrency market will peak in mid-March, followed by a severe correction. The article states that in the third quarter of 2022, when the Federal Reserve's reverse repurchase tool peaked, Bitcoin hit a bottom; Yellen adjusted bond strategies, withdrawing over $2 trillion from RRP, injecting liquidity into the market, and driving a surge in cryptocurrencies and stocks. In the first quarter of 2025, the market will focus on whether 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.
The Federal Reserve factors are secondary in the analysis, with a focus on how the Treasury will respond to the debt ceiling. If politicians hesitate, the Treasury may inject liquidity from the General Account (TGA), creating a positive atmosphere for cryptocurrencies. The Federal Reserve's quantitative tightening policy continues, but the RRP scale is nearly zero, and the RRP rate has been lowered to reduce attractiveness. This move aims to boost demand for U.S. Treasury bonds and pave the way for policies like halting QT. Yellen revealed that the Treasury expects to take 'extraordinary measures' for fundraising in mid-January. When will politicians agree to raise the debt ceiling is a test of Trump's support. It is expected that by May to June, the balance of the Treasury's General Account (TGA) will be exhausted, and the market may react in advance. By the end of the first quarter, the total amount of dollar liquidity from the Federal Reserve and the Treasury is estimated to be $612 billion. As the default and shutdown crisis approaches, an agreement will be reached to raise the debt ceiling, allowing the Treasury to resume borrowing and replenish the TGA, leading to a reduction in liquidity. After the tax deadline on April 15, the government's financial situation will improve, and liquidity will also decrease. If the TGA balance dominates cryptocurrency prices, the market may reach a peak at the end of the first quarter and then decline.
Yellen lowered the rate for issuing short-term Treasury bills, causing Powell's strategy to tighten financial conditions against inflation to fail. Although Trump's team may perform poorly on cryptocurrency and corporate legislation, a positive dollar liquidity environment may offset this impact. Hayes stated: 'I advise investors 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, I suggest risk-takers shift to an aggressive mode and venture into the decentralized science (DeSci) altcoin space. If things go smoothly, I will reduce baseline positions in March.'