Arthur Hayes, acclaimed digital asset investor and former CEO of BitMEX, foresees a notable surge in the crypto market during the first quarter of 2025, with a potential peak around mid to late March. His recent essay, "Sasa," explores a variety of macroeconomic factors that could influence this trend, from U.S. Federal Reserve policies to political uncertainty in Washington.
In a vivid opening, Hayes sets the stage with imagery from the ski slopes of Hokkaido, Japan. There, the precarious snow conditions are likened to the potential pitfalls facing the crypto market. He posits that the initial months of 2025 may witness a "dumping" of liquidity, propelling digital asset prices upward. However, he cautions that the political and fiscal dynamics in the United States may present unforeseen challenges.
Hayes analyzes the anticipation surrounding President Donald Trump's second term. He argues that while initial enthusiasm is high, disappointment could follow due to unmet policy expectations. However, he believes that any short-term setbacks might be mitigated by a strong "dollar liquidity impulse."
The Fed's Reverse Repo Facility (RRP) has significantly impacted Bitcoin's trajectory, correlating with price movements since 2022. Hayes explains how the facility's drawdown injected liquidity into markets, and he notes that recent changes make the RRP less attractive, pointing to a potential $237 billion market inflow driven by higher-yielding Treasury bills.
A critical part of Hayes’s thesis focuses on the Treasury General Account (TGA). He highlights the constraints faced by the Treasury due to debt ceiling limits, which necessitates drawing down the TGA to cover expenses, thus releasing liquidity. Without a resolution, the TGA might be depleted by mid-year. The ongoing political tug-of-war could delay necessary actions, with implications for market liquidity.
Combining these factors, Hayes projects a potential $612 billion rise in dollar liquidity for Q1 2025. However, March could see a decline as liquidity inflow slows and expectations for new federal spending or pro-crypto legislation might not be realized.
Drawing parallels to 2024, Hayes cites Bitcoin's price peaking mid-March and subsequent market shifts. Once TGA spending ceases, liquidity levels could turn neutral or negative, affecting risk assets. While external factors like Chinese credit policies and potential dollar devaluation by the Trump administration could disrupt this timeline, Hayes underscores the reliability of RRP and TGA as near-term indicators.
Hayes concludes with a strategic market perspective. Historically, the first quarter often presents significant selling opportunities, suggesting that investors could profitably exit positions before anticipated liquidity changes. "By springtime, it may be time to sell and wait for conditions to renew later in the year," Hayes advises.
At the time of writing, Bitcoin is trading at $101,344.