Arthur Hayes: "Bitcoin decline primarily caused by dollar liquidity contraction, not weakening fundamentals"

BitMEX co-founder Arthur Hayes pointed out that the main cause of the recent sharp drop in Bitcoin was not weakening fundamentals but a sharp contraction in dollar liquidity.

On the 18th (local time), Arthur Hayes wrote on his Medium that "the market has returned to a negative liquidity environment due to weakening fund flows related to exchange-traded funds (ETF) and digital asset firms (DAT), and the dollar liquidity index has decreased by about 1 trillion dollars since July," he analyzed.

Hayes argued that the 'fake buy demand' for Bitcoin disappeared particularly because ETF arbitrageurs exited and DAT premiums vanished. Previously, arbitrage flows from ETF creation and redemption structures (QI/PD) supported prices, but as that buying pressure was removed, Bitcoin had to be downwardly adjusted to match the actual liquidity environment.

He forecast that Bitcoin could fall further in the short term to 80,000~85,000 dollars. Such an adjustment could coincide with risk-off flows like rising US Treasury yields and credit events, and he mentioned the US stock market could also experience a 10~20% correction.

However, Hayes focused on potential policy shifts going forward. He said, "If US Treasury yields continue to rise and increase financial market stress, the Federal Reserve (Fed) and the US Treasury will have no choice but to supply liquidity again," and "if a policy shift actually occurs, Bitcoin could quickly rebound to the 200,000~250,000 dollar range by year-end."