Arthur Hayes Predicts Crypto Market Peak in Mid-March Before Severe Correction

by

Arthur Hayes, the ex-CEO of BitMEX, has put forth a daring prediction about the cryptocurrency market. He expects a market high to occur around March 2025, followed by a significant downturn.

He makes his forecast by examining the movements of U.S. dollar liquidity and how they influence international financial systems, with a focus on cryptocurrency markets in particular.

Role of US Treasury as Bitcoin Price Tracks Fed’s RRP

In essence, Hayes’ findings are based on two essential aspects of dollar liquidity: the Federal Reserve’s Reverse Repo Facility (RRP) and the US Treasury’s General Account (TGA). He points out that since Bitcoin experienced a low point in Q3 of 2022, its value has generally mirrored the RRP’s decrease. According to him, this correlation suggests an increase in market liquidity.

In his most recent piece titled “Trump Truth“, Hayes posed a question that’s been buzzing among crypto investors as we step into 2025: “Will the surge in crypto prices due to Trump’s influence persist?

The co-founder of Bitmex recognizes the potential for market dissatisfaction. He mentions that there could be hold-ups in enacting crypto-friendly regulations during Trump’s presidency. However, he thinks the present state of dollar liquidity continues to be advantageous.

The Federal Reserve’s quantitative tightening (QT) policy, which decreases its holdings by approximately $60 billion each month, is projected to eliminate around $180 billion in cash flow by the end of Q1 2025. Conversely, the Fed’s recent adjustment to the RRP rate could add as much as $237 billion to the liquidity supply. This additional liquidity would counterbalance the effects of QT, resulting in a net increase of around $57 billion in available funds.

Hayes emphasizes that the Treasury Department plays a crucial part in dealing with the debt limit issue, as Treasury Secretary Janet Yellen is considering extraordinary steps to finance government activities between January 14 and 23. By doing this, they will decrease the Treasury General Account (TGA), currently holding $722 billion, thereby increasing temporary liquidity since new borrowing won’t occur until Congress increases the debt ceiling.

According to past spending trends, Hayes anticipates that the TGA might run out by March, which coincides with his projected market high point.

Hayes Turns Up the Risk Dial, Cites External Factors

In his assessment, Hayes emphasizes the importance of dollar liquidity, but also warns that various broader economic factors might affect cryptocurrency values. Such factors could be changes in China’s lending policies, modifications from the Bank of Japan, or unforeseen actions taken by the Trump administration.

Despite some doubts, Hayes continues to trust in the mathematical basis for his liquidity predictions. He emphasizes a connection between the decrease in RRP (Repurchase Agreement Rate) and the increase in Bitcoin’s price since late 2022. According to him, these occurrences underscore the significant impact of liquidity on market movements.

In line with his strategy, Hayes intends to boost his venture’s risk involvement by investing in initiatives related to Decentralized Science (DeSci). The investment fund he manages, Maelstrom, has recently procured tokens like BIO, VITA, ATH, GROW, PSY, CRYO, and NEURON. This move indicates a wager on the budding DeSci storyline.

The statement underscores his willingness to take on ventures that offer both significant gains and potential losses. His excitement mirrors a growing tendency among investors to explore specialized markets with the ability to bring about major changes. However, Hayes acknowledged past miscalculations in predictions while stressing the need to adapt strategies according to fresh information.

Currently, Arthur Hayes is optimistic about the short-term future of the cryptocurrency market. However, he encourages carefulness as we approach the end of the first quarter, hinting at a tactical withdrawal due to potential tightening of dollar liquidity during the second quarter.

“Sell in the late stages of Q1, then chill,” he advises.

Combining Hayes’ liquidity-focused perspective provides a convincing guide for cryptocurrency investors during turbulent economic times. Although the hint of a peak in mid-March sounds appealing, his advice to exercise caution underscores the volatile nature of the crypto market.

According to CryptoQuant’s data analytics and as supported by analyst Crypto Dan, Hayes’s prediction concurs. Notably, Crypto Dan has pointed out that the current bull market, initiated in January 2023, may reach its peak somewhere between Q1 and Q2 of 2025. This assessment is based on observations indicating that approximately 36% of Bitcoin traded during the last quarter of 2024 was held for less than a month – a pattern reminiscent of previous market peaks.

Based on an increase of significant new investments, along with further contributions from current investors, it’s likely we’re near the end stages of this investment cycle.

Even though we’re seeing some signs, Crypto Dan suggests that substantial increases in Bitcoin and alternative coins might still occur before the market undergoes a correction. He advises staying cautious as the crypto market seems to be approaching maturity.

Read More

2025-01-07 11:09