Arthur Hayes: The crypto market may peak in mid-March, followed by a significant pullback

In his latest blog post, BitMEX co-founder Arthur Hayes explained why he believes the crypto market will peak in mid-March and then experience a severe pullback. The article stated that when the Federal Reserve's reverse repurchase tool peaked in the third quarter of 2022, Bitcoin bottomed out; Yellen adjusted bond strategies, withdrawing over $2 trillion from RRP to inject liquidity into the market, driving up cryptocurrencies and stocks. In Q1 2025, the market is focused on whether dollar liquidity can offset the impact of slow implementation of Trump's policies. If liquidity is sufficient, increasing risk exposure would be a safe choice.

The role of the Fed was secondary in this analysis with emphasis on how Treasury Department handles debt ceiling issues. If politicians hesitate, Treasury may inject liquidity from its general account (TGA), creating a positive atmosphere for cryptocurrencies. The Fed's quantitative tightening policy continues but RRP has nearly zeroed out and lowered its interest rate to reduce attractiveness. This move aims to boost demand for US bonds and pave way for stopping QT among other policies. Yellen revealed that Treasury expects to take "extraordinary measures" to raise funds in mid-January. When an increase in debt ceiling gets political approval tests Trump’s support level. It is expected that by May-June TGA balance will run out which might trigger early market reaction . By end-Q1 total dollar liquidity from both Fed Treasury estimated at $6 trillion 120 billion USD . As default shutdown crisis looms , agreement reached on raising debt limit , treasury resumes borrowing replenishing TGA leading to reduced liquidity . After April 15 tax deadline government finances improve reducing further liquidity . If TGA balance dominates cryptocurrency prices , markets could peak by end-Q1 followed by decline .

Yellen lowering rates for issuing short-term treasury bills undermined Powell’s strategy tighten financial conditions against inflation . Despite potential poor performance by Trump team on cryptocurrency corporate legislation , positive dollar liquidity environment may offset this impact . Hayes suggests : "Investors should sell in late Q1 and wait for improved liquidity conditions in Q3. As Chief Investment Officer of Maelstrom, I advise risk takers to switch to aggressive mode and venture into the field of decentralized science (DeSci) altcoins. If things go well, I will reduce my baseline position in March."