Bitcoin’s 2025 slowdown was driven by tight dollar liquidity, with easing U.S. monetary conditions seen as a key 2026 catalyst.
BitMEX co-founder Arthur Hayes has shared a new essay on Bitcoin’s price outlook. His latest essay, titled Frowny Cloud, explains BTC’s struggles in 2025 and outlines why conditions could improve in 2026. Hayes points to U.S. dollar liquidity as the main factor shaping Bitcoin’s trend.
Hayes Says Tight Dollar Liquidity Held Bitcoin Back in 2025
In the report, Hayes explains that Bitcoin’s struggles throughout 2025 were mainly due to tight dollar conditions. Throughout the year, the Federal Reserve continued to drain dollars from the system. This happened through quantitative tightening, also known as QT.
“Frowny Cloud” is a chart study of $BTC, gold, and stonks in 2025, and a prediction on how dollar liquidity will expand this year and send $BTC to Valhalla.https://t.co/UvagTQl219 pic.twitter.com/nj5ja6DEmi
— Arthur Hayes (@CryptoHayes) January 15, 2026
QT reduced the Fed’s balance sheet and made credit harder to access. When dollars are scarce, risky assets usually face pressure. And under those conditions, the OG coin failed to gain traction.
Towards the tail end of last year, Bitcoin moved within a tight range. Price-wise, it hovered between $87,000 and $95,000.
Many investors expected stronger gains after the halving. Hayes says that view missed the broader picture. In his opinion, Bitcoin was reacting to tight dollar liquidity, not a flaw in the asset itself.
Hayes stresses that this behavior does not signal weakness in Bitcoin itself. Instead, it reflects how closely the asset responds to changes in liquidity. Generally, Bitcoin tends to stall when the dollar tightens. And when liquidity improves, price action often follows.
Looking ahead, Hayes expects conditions to change in 2026. He believes U.S. dollar credit could expand through several channels.
One possibility involves renewed growth in the Fed’s balance sheet, which could add roughly $40 billion per month back into the system. Easier financial conditions may also encourage banks to increase lending after a prolonged slowdown.
Mortgage-Backed Securities Purchases Seen Supporting BTC Rally
Hayes also points to a possible return of mortgage-backed securities purchases. He estimates such a program could reach about $200 billion. Assuming this happens, lower mortgage rates would likely follow.
And as expected, this would benefit the economy. In turn, the liquidity flow could boost demand for risk assets such as Bitcoin and other cryptocurrencies.
Beyond the firstborn coin, Hayes has identified equities that tend to track Bitcoin with greater intensity. His preferred names include MicroStrategy and Metaplanet. Both companies hold sizable Bitcoin reserves and often experience larger price swings during market rallies.
According to Hayes, these stocks offer an efficient way to position for a Bitcoin breakout expected in early 2026.
Hayes added that if BTC can reclaim the $110,000 level, investor interest in these vehicles could accelerate. Because of the financial structures behind these companies, share prices may rise faster than Bitcoin during strong moves.
Image Source: TradingView
He also commented on Zcash, saying he continues to build a position despite recent developer changes at the Electric Coin Company. Hayes views the transition as constructive over the long term and says discounted prices offer opportunity.
At the time of writing, Bitcoin trades at $97,107, up 5.81% on the week. Market participants remain focused on U.S. monetary policy, as future liquidity decisions may shape Bitcoin’s next major trend.