Bitcoin Tracks Fed’s RRP, Mid-March Peak Expected

Arthur Hayes, former CEO of BitMEX, has issued a bold forecast for the cryptocurrency market, predicting a peak in mid-March 2025, followed by a severe correction.

He bases his prediction on an analysis of US dollar liquidity dynamics and their impact on global financial markets, particularly crypto.

Role of US Treasury as Bitcoin Price Tracks Fed’s RRP

Hayes’ analysis hinges on two key components of dollar liquidity: the Federal Reserve’s Reverse Repo Facility (RRP) and the US Treasury’s General Account (TGA). He notes that since Bitcoin bottomed in the third quarter (Q3) of 2022, its price has largely tracked the RRP’s decline. This, in his opinion, reflects increased market liquidity.

“As we begin 2025, the question on crypto investors’ minds is whether the Trump pump can continue,” Hayes wrote in his latest essay, Trump Truth.

The Bitmex co-founder acknowledges the risk of market disappointment. He cites possible delays in implementing pro-crypto policies under Trump’s administration. He believes the current dollar liquidity environment remains favorable.

The Fed’s quantitative tightening (QT) policy, which reduces its balance sheet by $60 billion per month, will remove $180 billion in liquidity by the end of Q1 2025. However, the Fed’s recent adjustment to the RRP rate is expected to result in a $237 billion liquidity injection. This would offset QT’s impact and yield a net positive liquidity of $57 billion.

Hayes highlights the Treasury’s critical role in addressing the debt ceiling, with Treasury Secretary Janet Yellen planning to implement “extraordinary measures” to fund government operations between January 14 and 23. This approach will draw down the Treasury General Account (TGA), currently at $722 billion, temporarily boosting liquidity as new debt issuance halts until Congress raises the debt ceiling.

Based on historical spending patterns, Hayes predicts the TGA could be 76% depleted by March. Of note, this aligns with his forecasted market peak.

Hayes Turns Up the Risk Dial, Cites External Factors

While dollar liquidity is central to his analysis, Hayes cautions that other macroeconomic factors could influence crypto prices. These include potential shifts in China’s credit policies, adjustments by the Bank of Japan, and unexpected moves by Trump’s administration.

Nevertheless, Hayes remains confident in the math supporting his liquidity-driven forecast. He points to the correlation between the RRP’s decline and Bitcoin’s price surge since late 2022. These, he says, are evidence of liquidity’s dominant role.

As part of his strategy, Hayes plans to increase risk exposure through investments in decentralized science (DeSci) projects. Maelstrom, the investment fund he leads, has acquired tokens such as BIO, VITA, ATH, GROW, PSY, CRYO, and NEURON. The investments signal a bet on the emerging DeSci narrative.

The statement reiterates his readiness to adopt high-risk, high-reward opportunities. His enthusiasm reflects a broader trend of investors seeking niche sectors with transformative potential. Nevertheless, Hayes acknowledged past forecasting errors while emphasizing the importance of adjusting strategies based on new data.

For now, Arthur Hayes is bullish on the crypto market’s near-term prospects. Still, he advises caution as the first quarter concludes, signaling a strategic retreat as dollar liquidity conditions tighten in the second quarter.

“Sell in the late stages of Q1, then chill,” he advises.

Taken together, Hayes’ liquidity-driven analysis offers a compelling roadmap for crypto investors amid an uncertain macroeconomic environment. While the promise of a mid-March peak is enticing, his call for caution reflects the volatility inherent in the crypto market.

Hayes’s prediction aligns with forecasts from data analytics provider CryptoQuant. A contributor, Crypto Dan, recently highlighted that the ongoing bull market, which began in January 2023, could peak by Q1 or Q2 of 2025. Dan’s analysis suggests that 36% of Bitcoin traded during the Q4 of 2024 was held for less than a month, mimicking patterns witnessed during previous market tops.

“With a substantial influx of new investments as well as additional funds from existing investors, it is reasonable to expect that the market is now in the latter stages of this cycle,” the post reads.

Despite this, he indicates that significant gains in Bitcoin and altcoins remain possible before the market corrects. Crypto Dan calls for caution amid a maturing cycle.