Arthur Hayes, co-founder of BitMEX, stated in a new essay titled “Sasa” that the crypto market may reach its peak at the end of the first quarter of 2025. In the publication, he extensively examined how dollar liquidity, U.S. Federal Reserve actions, and new government policies in the U.S. might affect the market.
Dollar Liquidity as a Key Factor
Hayes highlights the inflow of dollar liquidity as a primary driver of crypto market growth. He identifies two main sources:
- Reduced Balances in the Fed’s RRP (Reverse Repo) Facility:
A September drop in RRP already injected $2 trillion into markets, supporting gains in stocks and cryptocurrencies. By Q1 2025, RRP could fall close to zero, adding another $237 billion in liquidity. - Use of the U.S. Treasury’s General Account (TGA):
Since the government cannot raise the debt ceiling, the Treasury is forced to spend from the TGA, temporarily providing a positive liquidity impulse.
Combined, Hayes predicts the financial system could see $612 billion in new liquidity in the first quarter.
The Fed and Tightening Policy
Despite ongoing Federal Reserve balance sheet reductions (QT), which are expected to remove $180 billion from the system, the net impact on liquidity should remain positive. Hayes emphasizes that the Fed cannot abruptly change course as long as other liquidity sources persist.
Donald Trump’s victory in the 2024 election brought hopes for groundbreaking pro-crypto and pro-business policies. However, Hayes warns that potential delays in implementing these initiatives could be a negative factor. Still, he believes additional dollar liquidity can offset any disappointment from slower reforms.
When Will the Peak Occur?
Based on his calculations, Hayes forecasts that cryptocurrencies will hit a local high around late March 2025. Following that, the market may face a correction, especially as the TGA is depleted and the U.S. debt ceiling is raised.
Emerging Investment Trends
Hayes also discussed his fund Maelstrom’s strategy to increase risk investments in the first quarter, including allocations to lesser-known tokens in the field of decentralized science (DeSci).
Conclusion
Hayes acknowledges his predictions may not always materialize, yet he underscores the importance of adapting to new data. Despite potential risks, he remains optimistic about the coming months while cautioning investors to be prepared for a possible market correction in the second quarter.
This post is for informational purposes only and is not an ad or investment advice. Please do your own research making any decisions.