Arthur Hayes: BTC faces short-term correction on liquidity squeeze

BitMEX founder Arthur Hayes argued that Bitcoin could face a short-term correction due to dwindling global U.S. dollar liquidity but could see a strong rally by year-end once liquidity is reintroduced into the market. Hayes explained that global dollar liquidity has been contracting since April. He noted that while Bitcoin had previously been supported by ETF inflows and purchases from companies holding digital asset treasuries, this trend has now concluded. According to Hayes, the basis, or the spread between futures and spot prices, is no longer high enough to incentivize sustained institutional ETF purchases. Furthermore, he pointed out that most digital asset treasury companies are trading at a discount to their net asset value. As a result, he believes the withdrawal of institutional funds is now exposing Bitcoin to downward pressure from the broader liquidity crunch. Looking ahead, Hayes predicted that the administration of President Donald Trump and Treasury Secretary Scott Bessent will adopt a dual strategy. He expects them to publicly address inflation while privately injecting as much liquidity as needed to support the markets, a tactic he compared to 2023. At that time, he recalled, Treasury Secretary Janet Yellen's increased issuance of short-term government bonds moved $2.5 trillion from the Federal Reserve's reverse repo (RRP) program into the market, significantly boosting risk assets like real estate, gold, and cryptocurrencies. Hayes suggested that a new liquidity injection could be triggered once the S&P and Nasdaq indices fall by 10% to 20% and the 10-year U.S. Treasury yield approaches 5%. He described the current period as a necessary, brief correction before a major market rally. Once this phase passes and liquidity begins to flow, Hayes argued that Bitcoin could potentially surge to between $200,000 and $250,000 by the end of the year.