Bitcoin
The original memecoin
Investment Thesis
It's not so much that Bitcoin's value will rise as the value of fiat currencies will fall. Bitcoin is a hedge against money printing and inflation.
- Scarcity: Bitcoin has a capped supply of 21 million coins, making it deflationary and potentially similar to gold as a store of value.
- Security: The Bitcoin network is decentralized and uses cryptography, making it resistant to censorship and fraud.
- Global Accessibility: Anyone with an internet connection can hold and transact with Bitcoin, bypassing traditional financial systems.
- Potential Returns: Bitcoin's history suggests high volatility but also significant potential for growth.
- Low Correlation: Bitcoin's price movements may not be directly tied to stocks or bonds, offering portfolio diversification.
- Institutional Adoption: Growing interest from major institutions could increase demand and drive up the price.
- Utility: Store of value.
Arthur Hayes
Arthur Hayes predicts Bitcoin will reach $250,000 by the end of 2025.
This prediction hinges on a fundamental shift in Federal Reserve policy that would increase dollar liquidity globally. By monitoring Fed decisions, Treasury market metrics, banking regulations, and global central bank coordination, you can track whether his thesis is playing out as expected.
The relationship between liquidity and Bitcoin price is well-documented, with a historical correlation coefficient of 0.94. If Hayes is correct about the coming liquidity surge, Bitcoin could indeed experience significant price appreciation in the latter half of 2025.
Prediction Summary
Arthur Hayes, co-founder of BitMEX, has made several bold predictions about Bitcoin's price trajectory and the macroeconomic factors driving it. His core thesis revolves around a coming shift in Federal Reserve policy that will increase global liquidity and drive Bitcoin to new heights.
- Bitcoin Price Target: $250,000 by end of 2025
- Primary Catalyst: Fed transitioning from Quantitative Tightening (QT) to Quantitative Easing (QE)
- Timeline: Fed to ease monetary policy starting around April 2025
- Key Mechanism: Increasing global liquidity driving investment into Bitcoin
The Core Relationship: Fed Policy to Bitcoin Price
The foundation of Hayes' prediction can be understood through a simple flow relationship:
Fed Policy Change → Treasury Market Liquidity → Global Liquidity → Bitcoin Price
Flow Diagram 1: The Liquidity Pathway to Higher Bitcoin
Reduced QT/Start of QE → More Money in Banking System → Higher Market Liquidity
↓
Lower Bond Yields → Investors Seek Higher Returns → Capital Flows to Risk Assets
↓
Bitcoin (Fixed Supply Asset) → Attracts Disproportionate Capital → Price Increases
Hayes emphasizes that "Bitcoin is correlated to global liquidity more so than equities. It's just that NASDAQ is very correlated at the moment to global liquidity." Data shows Bitcoin has a 0.94 correlation coefficient with global liquidity measures.
The SLR Exemption Mechanism
A critical component of Hayes' prediction involves changes to banking regulations:
Flow Diagram 2: SLR Exemption Effect
SLR Exemption → Banks Can Hold Treasuries with Less Capital → Increased Buying Power
↓
More Treasury Buying → Lower Yields → Improved Market Functioning
↓
Enhanced Liquidity → Money Flows to Risk Assets → Bitcoin Benefits Most
The Supplementary Leverage Ratio (SLR) requires large banks to maintain capital against their total exposure. Exempting Treasuries from this calculation would significantly increase banks' ability to purchase government bonds.
Global Central Bank Coordination
Hayes predicts a global liquidity surge as all major central banks begin easing simultaneously:
Flow Diagram 3: Global Liquidity Cascade
Fed Eases Policy → ECB/BOJ Can Follow → China Can Reflate → Global Liquidity Surge
↓
Less Dollar Strength → Better Emerging Market Conditions → Broader Asset Rally
↓
Bitcoin as "Hardest Asset" → Captures Disproportionate Flows → Price Surges to $250,000
Hayes states: "This change out of the US will allow the Europeans and the Chinese to print the money that they were going to print anyways. It just accelerates the timeline."
How to Track These Predictions
Step 1: Monitor FOMC Meeting Outcomes
Set up a calendar and alert system for upcoming FOMC meetings:
- Next meetings: May 6-7, June 17-18, July 29-30, 2025
- Key announcement times: 2:00 PM ET on second day of meetings
- Set up alerts through financial news platforms like Bloomberg, Reuters, or CNBC
Step 2: Track Key Fed Policy Indicators
QT/QE Status Indicators:
- Fed's balance sheet size (weekly H.4.1 release)
- Treasury runoff pace (recently reduced from $25B to $5B monthly)
- Fed statements on balance sheet plans
- Powell's press conference comments on liquidity conditions
Banking Regulation:
- Statements from Treasury Secretary on SLR exemptions
- Bank regulators' proposals on leverage ratios
- Banking committee hearings in Congress
Step 3: Monitor Treasury Market Liquidity
Key Metrics:
- Reverse Repo Facility usage (recently below $100B from $2.55T peak)
- Treasury market volatility (MOVE index - was at 115 in March)
- Spread between effective federal funds rate and interest rate on reserve balances
- Timing of interbank payments (late payments indicate scarcer reserves)
- Daily overdraft levels at Fed (higher levels indicate reserves harder to obtain)
Step 4: Track Global Liquidity Indicators
Central Bank Actions:
- ECB balance sheet size and policy rates
- Bank of Japan policy changes
- PBOC (China) liquidity operations
- Global M2 money supply growth (strong correlation with Bitcoin)
Global Capital Flows:
- Foreign Treasury holdings (especially China)
- Dollar strength (DXY index)
- Global credit growth
Step 5: Monitor Inflation and Economic Data
Key Indicators:
- Core CPI (3.1% as of February 2025)
- PCE inflation (Fed's preferred measure)
- Unemployment data (currently 4.4%)
- GDP growth forecasts (currently 1.7% for 2025)
- Impact of tariffs on inflation data
Confirmation Signals to Watch
To validate Hayes' thesis, look for these sequential developments:
- Fed Signals: Further reduction in QT pace or complete cessation
- Treasury Market: Improving liquidity conditions, lower volatility
- Banking Regulation: Announcements on SLR modifications
- Global Central Banks: Policy coordination or similar easing signals
- Bitcoin Price Action: Breaking above previous all-time highs