Arthur Hayes Attributes Bitcoin's Decline to Reduced US Dollar Liquidity
Bitcoin billionaire Arthur Hayes argues that the recent decline in Bitcoin's price is primarily driven by a contraction in US dollar liquidity rather than changes in institutional sentiment or government support. He explains that Bitcoin acts as a 'free-market weathervane of global fiat liquidity' and trades based on expectations of future fiat supply.
Bitcoin recently dropped below $90,000, marking a seven-month low and erasing its gains for 2025. Hayes predicts that BTC could retreat further to the low-$90,000s but could also potentially surge to $200,000 to $250,000 by year-end if the US increases the money supply through more dollar printing.
Hayes attributes Bitcoin's gains from April until recently to ETF inflows and 'liquidity-positive' rhetoric from the Trump administration. However, he also points to significant outflows, including a record one-day withdrawal of about $463 million from BlackRock's IBIT ETF and approximately $2 billion in weekly crypto fund outflows.
He highlights that five of IBIT US's largest holders are hedge funds and investment firms, such as Goldman Sachs and Jane Street, which use the ETF as part of basis trades rather than directly holding Bitcoin. Basis trades involve buying a Bitcoin ETF and shorting a CME Bitcoin futures contract to profit from narrowing spreads between ETF and futures prices. These strategies provide collateral and capital efficiency.
JPMorgan estimated there were roughly $400 billion locked in basis trades as of April, showcasing the significant scale of these activities. Hayes warns that as ETF basis decreases, inflows slow, and retail investors might misinterpret this as reduced confidence in Bitcoin, creating a negative feedback loop that accelerates selling pressure.
