Bitcoin May Dip 20% Due to U.S. Treasury's Liquidity Drain

Arthur Hayes, the co-founder of BitMEX and current chief investment officer at Maelstrom Fund, has warned of a potential short-term dip in Bitcoin's price. He predicts that the leading cryptocurrency could experience a temporary price drop to around $90,000 due to the U.S. Treasury's plan to refill its checking account, the Treasury General Account (TGA). This action, which involves issuing new bonds, could temporarily drain liquidity from the financial system, potentially weighing on asset prices in the short run. Hayes explained that if the TGA refill proves to be dollar liquidity negative, then the downside for Bitcoin could be $90,000 to $95,000. However, he emphasized that this is not a call for a full retracement, but rather a cautious stance ahead of the Federal Reserve’s Jackson Hole meeting in August, which he sees as a potential inflection point.

Despite this caution, Hayes remains optimistic about Bitcoin's long-term prospects. He predicted a long-term surge in digital assets driven by U.S. fiscal operations that quietly reflate markets without formal monetary easing. Hayes warned that investors waiting for a clearer policy signal from the Fed before taking risk may miss out on significant gains. He suggested that Bitcoin will front-run liquidity expansion driven by fiscal operations rather than monetary signals. Stablecoins, in his view, are central to this liquidity wave. He believes that the U.S. government is quietly laying the groundwork for a major influx of capital into Treasuries—one that will ultimately act as fuel for risk assets like Bitcoin.

Hayes has previously predicted that the U.S. central bank’s monetary policy, specifically money printing, would eventually be a boon for Bitcoin and other crypto assets. He has forecasted that Bitcoin could skyrocket in the coming months to smash $250,000 before the end of 2025. This rocket surge will be bolstered by the U.S. Federal Reserve accelerating money printing to curtail the ballooning national debt. Hayes also suggests that the government's interest in stablecoins is not primarily about solving payment issues but rather about cutting the deficit. Stablecoins are digital tokens pegged to the value of non-volatile assets, usually dollars. The Senate recently passed legislation that creates a framework for issuing and trading stablecoins in the U.S. Hayes suggests that this law could stop private companies from issuing stablecoins, allowing big banks to use the digital tokens to buy up U.S. treasury bills as a way of reducing debt.

In summary, while Hayes anticipates significant volatility ahead for Bitcoin, he remains bullish on its long-term prospects. He advises caution in the short term due to the potential impact of the U.S. Treasury's plan to refill its checking account, but believes that Bitcoin will continue to push upwards thereafter. His predictions underscore his belief in the long-term potential of Bitcoin, despite the short-term volatility he anticipates.