Arthur Hayes, a heavyweight figure in the cryptocurrency space and founder of BitMEX, recently made astonishing remarks, urging investors in his family office MaelStrom to take bold risks and shift their risk appetite to "extreme mode (Degen Mode)." He predicts that this cryptocurrency bull market driven by the "Trump effect" will surge until mid to late March.
In a blog post published today (7), Arthur Hayes revised his pessimistic forecast made last December, when he believed that "around the time of Trump's inauguration, Bitcoin would experience a breathtaking crash." However, he has now changed his tune, stating that the current market's dollar liquidity is abundant enough to offset the policy risk that the Trump administration may bring. He pointed out:
I still believe this is a negative factor that may drag down market conditions in the short term, but this must be weighed against the positive impact brought by dollar liquidity.
So far, the Bitcoin market is dancing with the changes in dollar liquidity.
Is dollar liquidity boosting the cryptocurrency market?
Arthur Hayes believes that dollar liquidity is a key pillar of the market. He predicts that in the first quarter of this year, the balance of the Federal Reserve's (Fed) reverse repo operations (Reverse Repo Facility, RRP) will decline sharply, potentially approaching zero, which may release $237 billion in liquidity.
Although the Fed is still conducting quantitative tightening (QT), which is typically seen as a negative factor for dollar liquidity, Arthur Hayes stated that the Fed has lowered the RRP rate, decreasing the attractiveness of this tool for financial institutions. Therefore, institutions may reinvest these idle funds back into the market.
On the other hand, the U.S. Treasury is facing pressure from the debt ceiling and must take some "extraordinary measures" to maintain the normal operation of the government, including using funds from the cash reserve account known as the Treasury General Account (TGA) to cover expenses.
Arthur Hayes predicts that this will further inject liquidity into the market. He estimates that the U.S. Fed and Treasury combined will release $612 billion in liquidity in the first quarter.
Facing liquidity pressure after March, the cryptocurrency market may hit its peak.
Arthur Hayes further mentioned that as the TGA funds approach depletion in March, negative factors of dollar liquidity will gradually emerge, such as raising the debt ceiling and the tax payment deadline on April 15.
In addition, he also pointed out the Trump administration's policy implementation capacity, whether it can quickly cut government spending, and the interest rate policies of other global economies (such as the Bank of Japan), all of which will become potential variables affecting the market.
Betting on decentralized science (DeSci)
Based on the analysis above, Arthur Hayes stated that Maelstrom has shifted its investment focus to the field of decentralized science (DeSci) and has purchased DeSci-related tokens such as BIO, VITA, ATH, GROW, PSY, CRYO, and NEURON.
Arthur Hayes concluded in his article: "Although the future remains uncertain, taking all factors into account, I still hold an optimistic view of the market."
"Didn’t he say there would be a crash 'around Trump's inauguration'? Arthur Hayes changes his tune: the bull market will peak in March" This article was first published by (Blockcast).
