BitMEX co-founder Arthur Hayes argues that Bitcoin has entered a new bull market, pointing to US Treasury policy rather than Federal Reserve rate cuts as a potential catalyst for further gains. According to Hayes, US Treasury Secretary Scott Bessent is preparing to create additional dollar liquidity through Treasury market operations.
The core of the thesis is that when policymakers inject liquidity to keep Treasury yields under control, risk assets such as Bitcoin tend to benefit. Hayes compared Bessent's strategy to that of his predecessor, Janet Yellen, noting that both have faced pressure to control borrowing costs amid ongoing government spending while keeping the 10-year Treasury yield from approaching 5%.
In an essay discussing these market mechanics, Hayes detailed how previous debt-management actions moved money market fund balances from the Federal Reserve’s Reverse Repo program into T-bills. He estimated that a multi-trillion-dollar movement acted as a liquidity injection that coincided with rallies in both Bitcoin and the Nasdaq 100.
Bessent is reportedly attempting a similar approach using the Treasury’s debt-management tools, including an announcement to increase buybacks from $2 billion to at least $4 billion per operation. While initial reactions saw 10-year yields fall and Bitcoin rally, yields later climbed back. Hayes contends that current planned purchases remain small relative to the roughly $40 trillion US debt stock, but he anticipates that Bessent will materially increase the pace of dollar liquidity creation.
Hayes outlined several potential paths for the Treasury, including cutting spending, adopting an aggressive Bank of Japan-style pledge to buy unlimited bonds if yields top 5%, or utilizing smaller and more frequent buyback increases. He also identified the Treasury General Account, sitting at approximately $1 trillion, as another potential source of liquidity if drained to fund additional buybacks.
The discussion surrounds recent market movements where Bitcoin crossed $80,000 for the first time since May, following a period of significant price gains.
