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Arthur Hayes, co-founder of BitMEX, has predicted a market peak by mid-to-late March 2024. He attributes this to the Federal Reserve’s ongoing quantitative tightening (QT), which removes $180 billion in liquidity between January and March. However, Hayes also points to a $237 billion liquidity injection due to reduced balances in the Reserve Repo Facility (RRP). This results in a net liquidity increase of $57 billion in the first quarter.
Fed Policies and Treasury Actions Shape the Market
[embed]https://twitter.com/CryptoHayes/status/1876407031495901364[/embed] Hayes explains that the Fed is balancing its policies to control bond yields. He believes the 10-year US Treasury yield must stay below 5% to prevent market volatility. Additionally, Treasury Secretary Janet Yellen’s “extraordinary measures” to fund the government, amid the debt ceiling debate, play a critical role in liquidity management. Hayes anticipates a potential technical default or government shutdown by May or June unless Congress raises the debt ceiling. The Treasury’s actions, such as spending from its $722 billion checking account balance, could inject liquidity, while issuing debt would have the opposite effect. The depletion of these resources by March is expected to drive markets to seek alternative liquidity sources.
Crypto Market Implications
Hayes highlights parallels between these fiscal moves and Bitcoin’s performance. He recalls Bitcoin's local high of ~$73,000 in March 2023, followed by a decline in April as tax payments impacted liquidity. Looking ahead, he suggests monitoring liquidity trends for their influence on crypto and broader markets. As a risk-tolerant investor, Hayes disclosed plans to explore decentralized science (DeSci) projects and invest in tokens like BIO, VITA, and NEURON, signaling his confidence in emerging blockchain fields. Disclaimer: The views and opinions expressed in this article are for informational purposes only and do not constitute financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.