In a brand new essay revealed on Monday, Arthur Hayes—famend digital asset investor and former CEO of BitMEX—contends that the crypto market is poised to rally strongly within the first quarter of 2025 earlier than topping out someday in “mid to late March.” Hayes’s newest essay, titled “Sasa,” delves deep into a number of macroeconomic variables, together with US Federal Reserve (Fed) coverage, US Treasury Common Account (TGA) balances, the Fed’s Reverse Repo Facility (RRP), and political uncertainty in Washington.
Hayes started his essay by setting a vivid scene from Japan’s Hokkaido ski resorts, likening harmful backcountry situations attributable to inadequate snow cowl over sharp bamboo grass (sasa) to potential market obstacles that might reduce brief crypto rallies. He observes that 2025 has kicked off amid sturdy snowfall in Hokkaido—an apt metaphor for what he sees as a liquidity “dumping” that might propel digital asset costs upward. Nonetheless, he warns that the political and monetary surroundings in the USA could introduce surprising hazards.
Why March Might Mark The Subsequent Peak For Crypto
“As we start 2025, the query on crypto buyers’ minds is whether or not the Trump pump can proceed,” Hayes writes, referencing the preliminary optimism surrounding President Donald Trump’s second time period. Whereas Hayes believes “the excessive expectations for coverage motion out of the Trump camp arrange the marketplace for disappointment,” he maintains that any short-term negativity could possibly be offset by a strong “greenback liquidity impulse.”
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Hayes underscores that the Fed’s RRP has been essential for Bitcoin’s worth trajectory. Because the third quarter of 2022, the power’s unwinding has correlated positively with crypto and equities costs.
“Bitcoin bottomed in Q3 2022 when the Fed’s Reverse Repo Facility (RRP) reached its zenith,” he explains, noting that US Treasury Secretary Janet “Unhealthy Gurl” Yellen facilitated a shift from issuing longer-dated coupon bonds to issuing shorter-dated T-bills. This strategy, he argues, successfully drained greater than $2 trillion from the RRP, injecting liquidity into international markets.
Now, with the RRP falling to virtually zero, the Fed has “belatedly modified the coverage price of the RRP” to make it much less enticing. Hayes factors out that it nonetheless represents a possible $237 billion injection into markets as soon as the remaining RRP funds transfer into higher-yielding Treasury payments. In the meantime, ongoing quantitative tightening (QT) removes $60 billion monthly, totaling $180 billion between January and March. Netting each elements yields a $57 billion injection over the quarter.
One other main focus in Hayes’s thesis is the Treasury Common Account. As debt ceiling negotiations loom, the Treasury’s lack of ability to difficulty new debt means it may well solely cowl bills by spending down the TGA—an motion that releases liquidity.
“As a result of the mixture quantity of debt can not rise till the US Congress will increase the debt ceiling, the Treasury can solely spend funds from its checking account, the TGA,” Hayes writes, noting that the steadiness stands at round $722 billion.
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He estimates that with no debt ceiling decision, the TGA could possibly be exhausted by Could or June. For crypto markets, the crux of the matter is the timescale for a deal in Congress. The essay highlights Trump’s slim majority and the probability that Republicans who place themselves as fiscally conservative won’t grant fast or straightforward consent. Democrats, Hayes provides, are unlikely to facilitate enabling extra spending for a president they oppose—additional fueling legislative brinkmanship.
Based on Hayes’s calculations, TGA drawdowns might launch a further $555 billion from January via March. If mixed with the $57 billion web liquidity from the Fed’s RRP and QT changes, whole greenback liquidity might rise by as a lot as $612 billion within the first quarter.
Hayes zeroes in on March because the essential juncture—when this liquidity surge may start to wane and expectations for brand new federal spending or pro-crypto laws from the Trump administration could not materialize on schedule.
“I consider I answered the query I posed on the outset. That’s, the sasa of a letdown by staff Trump on his proposed pro-crypto and pro-business laws may be lined by a particularly constructive greenback liquidity surroundings,” he states, earlier than concluding that peak liquidity might subside rapidly as soon as the market anticipates the debt ceiling’s decision and the next refilling of the TGA.
From a historic lens, Hayes cites Bitcoin’s worth motion in 2024, which peaked in mid-March round $73,000, then drifted sideways and tumbled simply earlier than the April 15 tax deadline. The reasoning, he suggests, is easy: as quickly as TGA spending has run its course, the web constructive liquidity image reverts to impartial or unfavorable, leaving danger belongings susceptible.
Whereas Hayes acknowledges that Chinese language credit score growth, Financial institution of Japan rate of interest insurance policies, and the Trump administration’s potential greenback devaluation technique in opposition to different main currencies or gold might upend his timeline, he trusts that RRP and TGA mechanics are dependable near-term gauges. Crucially, these twin sources of liquidity seem highly effective sufficient to overshadow any disappointment about Trump’s insurance policies till no less than the tip of March.
“None of those main macroeconomic points may be identified a priori, however I’ve confidence within the math behind how the RRP and TGA balances will change over time,” he says, underscoring that the surging crypto and inventory markets since late 2022 align with the huge drain within the RRP.
Hayes concludes by suggesting that, traditionally, markets usually present vital promoting alternatives within the first quarter. By springtime, buyers may need to take income and “chill on the seashore” whereas ready for improved liquidity situations to re-emerge within the second half of the yr. “Proper on schedule, similar to virtually each different yr, it is going to be time to promote within the late phases of the primary quarter,” Hayes concludes.
At press time, Bitcoin traded at $101,344.
Featured picture from YouTube, chart from TradingView.com