The Fed announced last week that it would slow the pace of balance sheet reduction, which is expected to ease market liquidity. BitMEX co-founder Arthur Hayes predicted today that Bitcoin will first rise to $110,000 instead of retreating to $76,500, because the Fed is shifting from quantitative tightening (QT) to quantitative easing (QE) for U.S. Treasuries. For more detailed information, please see the text below.
The Federal Reserve (Fed) decided last week to keep interest rates unchanged at 4.25%-4.5%, maintaining expectations for two rate cuts in 2025, and announced a slowdown in balance sheet reduction starting in April, lowering the monthly redemption cap for U.S. Treasury bonds from $25 billion to $5 billion, while keeping the monthly redemption cap for agency bonds and mortgage-backed securities at $35 billion.
Since then, Bitcoin's recent trend seems to indicate a bottoming pattern. The current price is reported at $86,727, with a 7-day increase of 3.6%, and has risen more than 10% from the monthly low of $76,600. BitMEX co-founder Arthur Hayes asserted last week that Bitcoin may have bottomed at $77,000, but the stock market may still have room to decline, which could force the Fed to implement more accommodative policies: Powell has kept his promise, and QT basically ends on April 1. To truly push the market into a bull market, either the Supplementary Leverage Ratio (SLR) exemption policy must be restored, or quantitative easing (QE) must be restarted. Did Bitcoin bottom at $77,000? It's possible, but the stock market may still face more pain to fully sway Powell towards Trump’s camp, so stay flexible and keep enough cash on hand.
Arthur Hayes is optimistic that Bitcoin will surge to $110,000.
After the weekend, Arthur Hayes tweeted again today (24th), predicting that Bitcoin will first rise to $110,000: I bet Bitcoin will first rise to $110,000 instead of retreating to $76,500. The reason is that the Fed is shifting from quantitative tightening (QT) to quantitative easing (QE) for U.S. Treasuries, and tariffs are not important because they will only cause temporary inflation, according to Powell. I will elaborate on this viewpoint in my next article, but for now, here is a TikTok-sized summary.
Arthur Hayes was previously pessimistic about Bitcoin's trend. Since last month, he has repeatedly warned that Bitcoin might crash to the $70,000-$75,000 range in Q1 or early Q2. However, the outbreak of a small financial crisis could force the Fed to restart the printing press and drive Bitcoin to soar to a historic high of $250,000 by the end of the year. However, the Fed's recent actions seem to have significantly changed his perspective.
When the Fed slows the balance sheet reduction, it effectively reduces the liquidity being withdrawn from the market, essentially stopping QT in a disguised manner. The monthly redemption cap for U.S. Treasuries is slashed from $25 billion to $5 billion. The Fed is essentially starting to 'stabilize' demand in the bond market. This operation will lower yields and stabilize risk asset valuations, which the market naturally interprets as a signal of easing.
In Arthur Hayes' view, highly sensitive assets like Bitcoin are extremely sensitive to changes in liquidity, and a resurgence of funds is just a matter of time. Therefore, while the Fed's actions are not traditional QE, the effect is the same, allowing the market to respond accordingly.
This is Arthur Hayes' analysis: Bitcoin will first rise to $110,000! Details on the Fed's slowdown in balance sheet reduction as a form of QE, and more information about Bitcoin's recent bottoming trend can be found in other articles by Liang Ge!