BitMEX co-founder Arthur Hayes predicts a potential peak in the crypto market by mid-March 2025, followed by a severe correction. He analyzes the U.S. dollar liquidity environment during Q1 of the year and how it has influenced the market thus far.
The Federal Reserve’s quantitative tightening is shrinking its balance sheet by $60 billion a month, while recent adjustments to the reverse repurchase agreement are directing liquidity toward Treasury bills. Put otherwise, this injects $237 billion into markets. Adding all these together, the $180 billion taken away from results in addition to net liquidity worth $57 billion starting in Q1 2025.
How US Treasury moves could impact crypto markets in early 2025
The US Treasury also plays a key role. Secretary Janet Yellen claimed that between Jan. 14th and 23rd, the government could resort to extraordinary measures to finance itself. The Treasury can choose between the two types of the TGA: one that decreases liquidity and the other that increases liquidity, which is debt issuance.
Currently, the balance in the TGA stands at $722 billion. When that is exhausted, as it could be as early as the middle of 2025, the Treasury will have to increase the debt ceiling and may influence market liquidity.
He sees the $612 billion liquidity expected at the end of Q1 2025 fueling the crypto and stock rallies in the short term. Of course, things are never that simple, and several macro factors could interfere. Those include possible action from China, Japan, and the US government, which would change the broader liquidity landscape.
Bitcoin’s Q1 2025 outlook: Liquidity surge before a crash
That would be similar to what happened in 2024 when Bitcoin peaked at around $73,000 in mid-March and fell back in April at the tax payment deadline. According to Hayes, the same could happen in 2025, with the peak of liquidity injections in March followed by a market correction.
Despite these predictions, Hayes realizes the volatility of markets, especially in geopolitical and domestic uncertainties. Though dollar liquidity is a driver, changes in policy and external factors might change the direction. He is bullish on short-term crypto movements but advises caution and flexibility.
