Arthur Hayes, co-founder of BitMEX, pointed out in his latest long article “Snow Forecast” that since April, the inflow of ETFs supporting Bitcoin and the reserve company (DAT) has completely cooled down, while USD liquidity has been tightening, forming the main reason for the current fall in the crypto market. He expects that risk assets will face deeper corrections in the short term, and only after the U.S. government and The Federal Reserve (FED) restart the printing press will the market truly return to long positions.
Core metaphor: The market is like the weather, Bitcoin has become the global liquidity weather vane.
Hayes uses the skiing season in Hokkaido as a metaphor, describing how investors often have to decide when to enter the market under incomplete signals.
He pointed out that the price of Bitcoin reflects the market's expectations of future fiat currency supply. When political signals lean towards easing, BTC reacts in advance; and vice versa.
However, the contradictory signals constantly released by the Trump administration and U.S. fiscal policy make it more difficult for the market to interpret the direction of liquidity.
Why is Bitcoin falling? The main reasons are the slowdown in ETF and DAT inflows and the tightening of US dollar liquidity.
Hayes also explained that Bitcoin rose from April to October even though the US dollar liquidity indicators weakened; as well as the reasons for the weakness and decline in the second half of the year.
ETF basis trading inflates buy orders
First, large institutions buy IBIT and other Bitcoin spot ETFs, short-sell CME futures to conduct basis arbitrage (Basis Trade), which is not a fundamental buying pressure.
Basis rising → Large inflow into ETFs, retail investors mistakenly believe that institutional interest in BTC has surged and follow by buying in.
Basis decline → Arbitrage funds collectively withdraw → Large outflows from ETFs → Retail investors follow suit and sell, driving down market prices.
Basis trading is a commonly used arbitrage strategy by hedge funds, profiting from the slight price differences between government bond spot and futures, while using high leverage to amplify returns.
( Bitcoin ETF continuous net inflow but no rise? CME short selling arbitrage hits a new high, none are here to buy coins ( basis trading, basis arbitrage )
DAT premium disappears, accumulation momentum stagnates
At the same time, when the mNAV premium of DAT stocks relative to BTC holdings disappears, companies will no longer be able to issue more stocks to exchange for cheap Bitcoin, and the upward momentum will also slow down accordingly.
He pointed out that these factors together create an illusion of liquidity: “What seems to be strong institutional buying is actually for arbitrage purposes and not from long-term buyers.”
The liquidity of the US dollar is rapidly shrinking.
On the other hand, the liquidity of the dollar has evaporated by nearly 1 trillion since July, which has also become one of the main reasons for the limited growth of BTC prices:
As the ETF basis arbitrage is no longer attractive to institutions, the purchasing speed of DAT slows down, the Treasury replenishes the TGA, and the Federal Reserve has not yet officially restarted quantitative easing, Bitcoin, as a risk asset, will also be the first to bear the brunt.
Political moment: Trump and Treasury Secretary Bessent must ultimately lead the market to take off.
Hayes pointed out that the essence of U.S. monetary policy is a political act: “Trump wants to maintain asset prices to ensure political support, but in the face of inflationary pressures, he must pretend to be hawkish; however, the market will ultimately force the government to make a choice.”
He bluntly stated that the United States will face a choice of “either printing money to save the market or allowing credit contraction to trigger a wave of unemployment:”
However, in political reality, bailouts, that is, printing money, are always more easily accepted than recessions.
Therefore, Hayes believes that Trump and Treasury Secretary Bessent will ultimately inject funds back into the market through private financial maneuvers or blatant QE.
)Arthur Hayes is optimistic about Japan's new Prime Minister Sanae Takaichi's trillion-yen economic plan: BTC is expected to reach one million dollars(
Credit pressure accumulation increases the chances of easing, with Bitcoin targeting $250,000.
Hayes also pointed out the abnormal situation where BTC continues to fall while many indices in the United States remain hovering at high levels, believing that the rapid decline of the dollar liquidity curve may be a precursor to accumulating credit pressure:
So when the stock market corrects by 10% to 20% and the yield on 10-year government bonds approaches 5%, the government will be forced to intervene and accelerate money printing, driving a comprehensive rise in the risk market.
He predicts that once large-scale easing policies are introduced, Bitcoin is expected to soar to $200,000 or $250,000 by the end of the year; however, during this weak period, it may still fall to between $80,000 and $85,000.
China's Role: After the US prints money, China will fully follow up with QE.
Finally, regarding the People's Bank of China increasing its holdings of government bonds for the first time, Hayes believes this is a prelude to potential quantitative easing in China. However, it will wait for the US dollar to undergo QE first before fully loosening liquidity to avoid excessive depreciation of the Renminbi.
He emphasized that if China and the United States simultaneously initiate monetary expansion, 2026 will become a super bull market year for crypto assets.
In this article, Arthur Hayes interprets the main reason for the market fall: Bitcoin could drop to as low as 80,000 USD, still waiting for liquidity to return. First appeared in Chain News ABMedia.
