In his new essay Hallelujah, former BitMEX CEO Arthur Hayes explains why U.S. fiscal and monetary policy could ignite the next crypto bull market. Hayes argues that the country is approaching a phase of “hidden quantitative easing” – essentially money printing in a more discreet form. The regulator does not officially announce new issuance, but in practice, it injects dollars into the system through loans to banks and purchases of government debt.
“This will create new conditions for Bitcoin’s growth,” Hayes wrote.
He explained that every government has two ways to pay its bills – raise taxes or borrow. Since tax hikes are politically unpopular, policymakers inevitably choose debt. In the United States, this dependency is especially pronounced: the federal budget deficit for 2025 is projected at about $2 trillion, and the Treasury plans to borrow roughly the same amount.
Who Buys U.S. Debt
In the past, a large share of U.S. debt was purchased by foreign governments. However, after the freezing of Russian assets, central banks have become more cautious about holding too many U.S. securities. Private investors cannot fill the gap either: household savings are too low, and major banks remain reluctant to expand their bond holdings.
According to Hayes, the primary buyers of U.S. Treasuries today are hedge funds registered in the Cayman Islands. Over the past two years, these funds have purchased nearly $1.2 trillion in bonds – roughly one-third of all new issuance.
Hedge funds, Hayes explained, profit from price differences between Treasury bonds and related futures contracts, heavily relying on borrowed funds to amplify returns.
How the Fed Intervenes
The problem is that such strategies require short-term funding, and funds borrow cash using those same bonds as collateral. When liquidity in this market dries up, borrowing costs surge, forcing the Federal Reserve to step in to prevent instability.
To manage this, the Fed uses a mechanism called the Standing Repo Facility (SRF), which allows banks and hedge funds to obtain cash against Treasuries at the upper limit of the key rate.
According to Hayes, when the volume of SRF operations increases, the Fed is effectively printing money to pay the government’s bills.
“If the SRF balance is above zero, it means the Fed is covering politicians’ expenses with freshly printed dollars,” he wrote.
Formally, this is not called quantitative easing, but in essence, it works the same way. Hayes believes the Fed avoids announcing a new round of stimulus to prevent public debate about inflation – which is why it acts quietly. This, he says, is what constitutes “stealth QE.”
Why It Matters for Bitcoin
When the Fed increases the amount of money in circulation, liquidity rises – and so does investor appetite for riskier assets, including cryptocurrencies. Hayes argues that the expanding U.S. debt will force the Fed to rely more heavily on the SRF mechanism, leading to a steady inflow of new dollars into the market. He believes this will become the main driver of Bitcoin’s next major rally.
However, Hayes warns that until “stealth QE” fully kicks in, the market may remain volatile. At the moment, the U.S. Treasury is borrowing but not yet spending the raised funds, effectively draining liquidity from the economy. This temporarily pressures asset prices, including cryptocurrencies.
Hayes concludes that this is only a short-term phase before the next uptrend. Once the Fed begins actively supporting the debt market and injects liquidity back into the system, Bitcoin, he says, will start rising again.
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