Former CEO of cryptocurrency exchange BitMEX, Arthur Hayes, believes that the crypto market will reach its peak in mid-March 2025, before experiencing a severe correction.
“I think crypto tops out in mid-Mar and then severely corrects. Until then is time to dance,” he wrote on X, on Tuesday.
Hayes explained that the Federal Reserve’s quantitative tightening policy continues at $60 billion per month. This is a reduction in the size of its balance sheet, he wrote in his essay.
His prediction of the crypto market peaks in mid to late March, equates to a removal of $180 billion worth of liquidity due to quantitative tightening from January to March.
The BitMEX co-founder noted that Bitcoin slumped in 2022 when the Fed’s Reverse Repo Facility (RRP) reached its zenith.
He argued that this was because the U.S. Treasury Secretary, Janet Yellen, had issued lesser longer-dated coupon bonds and more shorter-dated zero-coupon bills, draining over $2 trillion from the RRP.
“This is a liquidity injection into the global financial markets. Crypto and stocks, especially US-listed big tech stocks, ripped as a result,” Hayes wrote.
Further, he argued that the Treasury would spend down its general account (TGA) at the Fed, which would induce liquidity into the system. Such a move would be a bullish signal for Bitcoin in the short term.
Arthur Hayes believes the RRP will go from ~$237 billion to zero in the first quarter as money market funds (MMF) maximize their yield by withdrawing funds and purchasing higher-yielding Treasury bills.
“This represents an injection of $237 billion of dollar liquidity in the first quarter,” he added.
Additionally, he noted that tax deadlines will be another bearish headwind for crypto in April. As a result, he believes that the overall crypto market will experience a massive correction.
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