Arthur Hayes, the former CEO of BitMEXpredicted a possible spike in prices of Bitcoin (CRYPTO:BTC) at the end of March 2025, driven by an increase in dollar liquidity.
Money flowing into the system is bullish
In his latest blog post on January 7, Hayes argues that a complex interplay between U.S. Federal Reserve policy and Treasury actions will create a favorable environment for crypto gains in the first quarter before experiencing a possible correction.
Hayes highlights the current liquidity injections stemming from the decline of the Fed’s Reverse Repo Facility (RRP) and Treasury General Account (TGA).
According to Hayes, the RRP, “fell to almost zero,” representing an injection of “$237 billion in liquidity in the first quarter.”
He explains that combined with other factors, this results in a “net injection of $57 billion in liquidity” even taking into account the Fed’s quantitative tightening.
Hayes also notes that Treasury will begin taking “extraordinary measures” to fund government spending due to the debt ceiling, which will initially result in a reduction in its TGA account balance, creating additional positive liquidity.
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However, Hayes cautions against the temporary nature of this positive environment.
“The real question is how quickly the RRP goes from ~$237 billion to zero,” and while those funds are flowing into the markets, the debt ceiling crisis could change that: “Once default and With the closure imminent, a last-minute deal will be reached, and the debt ceiling will be raised.
At that point the Treasury will again be free to borrow on a net basis and will need to replenish the TGA account. This will have a negative impact on dollar liquidity.”
Why the first quarter will be a “sales period”
In his analysis, Hayes also addresses the potential impact of Trump’s policies, noting that “the Trump team’s disappointment with its pro-crypto, pro-business legislative proposal may be offset by a liquidity environment extremely positive dollar”.
However, Hayes remains cautiously optimistic about the first quarter of 2025, explaining that “this will be the time to sell at the end of the first quarter and relax at the beach… and wait for positive fiat liquidity conditions to re-emerge in the third trimester.”
Despite recognizing the inherent risks, Hayes says he is confident in the liquidity factors: “I have confidence in the mathematics behind how RRP and TGA balances will change over time.”
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