Maelstrom Founder Predicts 36% Bitcoin Correction Amid Dollar Liquidity Tightening

Arthur Hayes, the founder of Maelstrom, recently shared his insights on potential market movements ahead of the Jackson Hole economic symposium in August. He highlighted the possibility of the Treasury General Account’s refill, reaching $486 billion, which could tighten dollar liquidity. This tightening could potentially pull Bitcoin down from its peak to the $90,000 – $95,000 range. In response to this short-term risk, Maelstrom has decided to close its illiquid altcoin positions and may also reduce its Bitcoin holdings. Hayes believes that a correction of roughly 36% from Bitcoin's peak is typical during a bullish market phase, as such pullbacks often precede significant upward movements.

Hayes evaluates that following the increase in the debt ceiling, the Treasury General Account’s completion to $850 billion will temporarily reduce the circulating dollar. He warns of a potential pullback of Bitcoin after its current peak tests, seeking support in the $90,000 to $95,000 range. However, the symposium might light up recovery as of early September if Fed Chair Jerome Powell hints at easing quantitative tightening.

Hayes explained that Maelstrom will hold a “substantial” position in staked USDe (Ethena USD) during July-August, serving as a hedge against volatility. Accordingly, the company has sold all illiquid altcoins, which provided 2-4x returns since April. Hayes emphasized that until a clear liquidity catalyst emerges for the markets, Maelstrom could gradually lessen its Bitcoin risk.

In the medium term, Hayes anticipates that the introduction of stablecoins by major banks and a potential return of $10.1 trillion in purchasing power to the markets could drive asset prices higher. This optimistic outlook is based on the belief that stablecoins will play a crucial role in the future of digital assets, potentially leading to a "stablecoin gold rush." However, Hayes also warns of a potential "graveyard of future flops" as not all stablecoin projects will succeed.

Hayes associates U.S. Treasury Secretary Scott Bessent’s support for stablecoin regulation with the need to control borrowing costs. This regulation allows numerous and substantial too-big-to-fail (TBTF) banks to issue stablecoins, directing deposits amounting to $6.8 trillion toward treasury securities. Complementary to this is the waiver of the Supplementary Leverage Ratio (SLR), allowing these assets to be held with almost infinite leverage.

According to the Maelstrom founder, the removal of interest payments by the Fed on bank reserves could generate an additional $3.3 trillion in demand. He regards the total potential of $10.1 trillion as a new version of the “Activist Treasury Issuance” model proven successful since 2022. Furthermore, Hayes emphasized how the “Genius Act” limiting FinTech issuers gave TBTF banks an unrivaled space, citing JP Morgan’s JPMD stablecoin as an indicator of this strategy. He believes this mechanism could ignite a long-term rally in stocks, bonds, and especially Bitcoin, extending until 2026.

Hayes' predictions are not without controversy. Some analysts have suggested that the current economic climate, marked by sustained inflation and geopolitical worries, could lead to further volatility in the cryptocurrency market. However, Hayes remains optimistic, believing that Bitcoin is still in the early stages of its bullish phase and that the $110,000 range is the threshold for a serious move higher. He sees the potential for Bitcoin to dip to $70,000 before soaring to $250,000 by 2025, a prediction that, if realized, would represent a significant increase in value.

In summary, Arthur Hayes' predictions for Bitcoin's future are a mix of caution and optimism. While he acknowledges the potential for short-term volatility and corrections, he remains bullish on the long-term prospects of Bitcoin and the broader cryptocurrency market. His insights provide a valuable perspective on the potential impact of economic policies and technological innovations on the future of digital assets.