Key Takeaways
- Hayes expected bitcoin weakness until Fed or bank balance sheets grow.
- Commercial lending can expand dollar deposits independently of Fed purchases.
- His longer-term outlook includes bitcoin eventually reaching $1 million.
Hayes Points to Banks Alongside the Fed
Arthur Hayes, co-founder of cryptocurrency derivatives exchange Bitmex and chief investment officer at crypto investment firm Maelstrom, linked bitcoin’s outlook to commercial bank or Federal Reserve balance sheet growth on X on Nov. 2. In his assessment of dollar liquidity, he stated:
“USD liquidity is recharging. Expect $BTC weakness until Fed and or banks start growing their balance sheet.”
His argument centers on dollar liquidity: the availability of dollar funding and credit for spending and investment. Balance sheet expansion means growth in an institution’s assets, financed by liabilities or capital. His forecast implies that renewed expansion could support bitcoin demand and help prices recover.
Lending Provides Another Route to Monetary Expansion
Commercial bank money creation occurs when a lender issues a loan and creates a matching deposit in the borrower’s account. That expands the money available for spending or investment. The Bank of England identifies monetary policy, regulation, and profitability as constraints on this process.
Global liquidity and money supply encompass broader monetary conditions, while bank deposits and central bank reserves represent distinct forms of money. New lending can create deposits without a corresponding Fed asset purchase. Lending therefore illustrates one way commercial banks could provide the monetary expansion Hayes anticipated.
Fed assets and reserve balances provide a separate channel. Central bank asset purchases can supply reserves, while movements in other accounts can offset that effect. A January Fed staff analysis explained that increases in Treasury cash or reverse repurchase balances reduce reserves unless the Fed offsets them.
Monetary Data Has Guided His Bitcoin Positioning
In January, Hayes connected bitcoin’s recovery prospects to bank lending and Fed purchases. He identified both as contributors to dollar availability. He also argued that a return above $110,000 could revive demand for leveraged bitcoin exposure through corporate treasury companies.
An April warning about constrained bitcoin upside emphasized the quantity of money over its price. Hayes argued that credit stress could limit a sustained rally until policymakers supplied liquidity. His distinction placed money creation ahead of borrowing costs in explaining bitcoin’s direction.
His conditional bitcoin bull case in January also focused on currency intervention: buying or selling currencies to influence exchange rates. Hayes monitored the Fed’s foreign currency assets, holdings denominated in currencies other than dollars. He identified growth in those holdings as a potential signal for increasing bitcoin exposure.
Longer-Term Outlook Includes $1 Million Bitcoin
Beyond those monetary signals, Hayes endorsed bitcoin eventually reaching $1 million in an interview with Crypto Wendy O. He also said he paid more attention to exchange-traded fund inflows than to Michael Saylor’s purchases.
Separately, his crypto bull-run forecast shared on Oct. 8 anticipated a major rally despite fears about artificial intelligence threatening encryption. The argument linked higher crypto prices to renewed money creation. Hayes summarized that expectation:
“Money shall be printed, bags shall pump.”
