Hayes Sees Fed's Third Mandate as Bitcoin's Catalyst

Arthur Hayes, co-founder of BitMEX, has made a bold assertion that Bitcoin could reach $1 million, arguing that the U.S. Federal Reserve's evolving monetary policy is the catalyst. This claim centers on the potential implementation of yield curve control (YCC), a strategy Hayes ties to the Fed's broader economic goals. According to Hayes, the recent confirmation of Stephen Miran to the Fed’s Board of Governors marks a critical shift, as it aligns with the central bank’s statutory mandate to promote “moderate long-term interest rates.” This third mandate, often overlooked, could enable the Fed to directly influence long-term interest rates, a move that Hayes suggests will have profound implications for the cryptocurrency market.

The Fed’s current approach, as detailed in the 1913 Federal Reserve Act, includes promoting maximum employment, stable prices, and moderate long-term interest rates. Hayes argues that emphasizing the third mandate allows the Fed to employ YCC, which involves targeting specific yields on medium- and long-dated Treasuries. This strategy is not purely theoretical; it has been used in Japan since 2016 and briefly in Australia. If implemented, YCC could cap long-term yields, thereby suppressing real yields and accelerating fiat debasement. This dynamic, according to Hayes, would drive capital into hard-cap assets like Bitcoin, positioning it as a hedge against inflation and monetary depreciation.

Market reactions to the potential for YCC have been swift. Several industry figures, including Bitwise CIO Matt Hougan and macro investor Lawrence Lepard, have publicly endorsed the idea, highlighting its alignment with broader economic trends. Mel Mattison, who previously emphasized the importance of the third mandate, noted that in times of conflicting economic goals—such as during the 2020 pandemic—policymakers could prioritize long-term interest rates to stabilize debt service and employment. This flexibility, as Hayes explains, is central to his thesis and underscores the Fed’s potential shift from guidance to direct control over the yield curve.

The implications of such a policy shift for Bitcoin are significant. Hayes has long tied the cryptocurrency's potential to macroeconomic developments, suggesting that aggressive monetary easing and capital flight could supercharge its price. In a separate analysis, he cited U.S. treasury devaluation and rising capital repatriation as key drivers, predicting that Bitcoin could reach $1 million by 2028. This projection is based on the expectation that investors will seek refuge in hard assets as bond yields climb. Despite short-term volatility, Hayes believes the macroeconomic tailwinds aligning—such as rising government deficits and the likelihood of renewed quantitative easing—will eventually favor Bitcoin and other cryptocurrencies.

The broader macroeconomic landscape supports these predictions. The U.S. Federal Reserve is expected to cut interest rates in September 2025, with over 90% of market participants anticipating a 25-basis-point reduction. Rate cuts typically expand liquidity and weaken the U.S. dollar, which historically benefits Bitcoin. However, the context is complex, as inflation remains above target and stagflation concerns persist. While bulls argue that liquidity and ETF inflows could drive Bitcoin higher, bears caution that volatility, especially during events like the September triple witching, could lead to sharp corrections. The Fed's tone in the post-meeting press conference and updated projections will likely play a pivotal role in determining the direction of the market.

Empirical studies further reinforce the connection between macroeconomic factors and cryptocurrency pricing. Research indicates that risk appetite and market liquidity are key drivers, with nonlinear dynamics influencing Bitcoin and Ethereum differently. Changes in expectations for future economic conditions often induce opposing market reactions. For Bitcoin, the relationship with macroeconomic variables tends to be relatively unstable, showing noticeable shifts in significance over time. In contrast, Ethereum exhibits more consistent causal relationships, likely due to its broader ecosystem and active use cases.

As the Fed’s September policy meeting approaches, the debate over whether it will embrace YCC or maintain its traditional approach continues. Hayes and others argue that the third mandate provides a statutory foundation for more aggressive intervention, moving the discussion from fringe speculation to mainstream analysis. For Bitcoin, merely acknowledging this path is seen as a “trigger,” setting the stage for potential price appreciation. However, the ultimate success of this thesis depends on how the Fed balances its mandates and whether the market accepts the policy shift as a necessary step to stabilize the economy.