Arthur Hayes Attributes Bitcoin Price Drop to Tightening Dollar Liquidity

Arthur Hayes in his essay "Snow Forecast" attributes Bitcoin's recent price decline from its October peak to reduced dollar liquidity following the drying up of derivative-driven flows. According to Hayes, Bitcoin reflects global fiat liquidity expectations rather than reacting to immediate news.

Reasons for Bitcoin Price Decline

• April 2025 saw fears of economic depression due to tariff actions by the Trump administration, leading to a temporary Bitcoin rally.
• The rally was driven by ETF basis trades and Digital Asset Treasury (DAT) vehicles, creating a false sense of institutional adoption.
• As ETF basis collapsed, there were significant outflows from hedge funds and prop trading desks, affecting Bitcoin prices.
• DATs also contributed to an illusion of demand, with their effectiveness diminishing as stock premiums turned into discounts.

Ending the Bitcoin Downtrend

• Hayes argues political actions will determine future money supply, comparing current strategies to those used in 2022.
• Despite potential short-term boosts, he highlights $1 trillion in evaporated dollar liquidity since July, making any boost marginal unless further quantitative easing is signaled.

Company Positioning

• Hayes adjusted Maelstrom’s strategy by increasing USD stable holdings while remaining long on crypto.
• He views Zcash (ZEC) as potentially resilient due to privacy concerns.

Outlook and Predictions

• Hayes warns of a possible credit event and equity drawdown, with Bitcoin potentially dropping to $80,000–$85,000.
• If monetary policy shifts favorably, Bitcoin could rise to $200,000–$250,000 by year-end.
• China may join US in easing, considering Bitcoin a strategic asset.

At press time, Bitcoin traded at $90,477.