Arthur Hayes: Don't be afraid if Bitcoin falls to 80,000, the real money printing frenzy hasn't started yet.

The cryptocurrency market is as full of variables as predicting snowfall, with Bitcoin serving as a global liquidity barometer facing adjustment pressure under the contraction of USD liquidity. This article is sourced from a piece by Arthur Hayes, organized, translated, and written by the team at Dong District. (Background: Arthur Hayes: Japan's new Prime Minister is promoting economic stimulus policies, which are expected to help Bitcoin soar to $1 million) (Supplementary Background: Arthur Hayes' family office raised a $250 million fund! Aiming at holding crypto entity companies) (Any views expressed here are solely those of the author and should not be the basis for investment decisions or interpreted as advice or opinions for engaging in investment trading.) It’s time for me to play the meteorologist again. Concepts like El Niño and La Niña have entered my vocabulary. The direction of forecasting a snowstorm is just as important as the amount of snowfall, which determines which slope to slide down. I use my rudimentary knowledge of weather patterns to opine on when Hokkaido, Japan transitions from autumn to winter. I discuss with other local skiing enthusiasts my dreams of an early start to the powder season. On my smartphone, the app I refresh most often isn’t my favorite cryptocurrency chart software, but rather Snow-Forecast. As data starts to trickle in, I have to decide when to hit the slopes with incomplete information. Sometimes, it’s not until the day before you strap on your skis that you know what the primary weather pattern is. A few seasons ago, when I arrived in mid-December, I found the mountains covered in dirt. Only one lift was open, serving thousands of skiers. I stood in line for hours just to ski on the few beginner to intermediate slopes that had some snow cover. The next day, it snowed heavily, and I spent an epic powder day at my favorite ski area in that region, where the trees were everywhere. Bitcoin is a free market barometer for global fiat liquidity. It trades based on expectations for future fiat supply. Sometimes reality aligns with expectations, and sometimes it doesn’t. Money is politics. And political rhetoric is constantly changing, impacting the market's expectations for future dirty fiat supply. One day, our imperfect leaders call for cheaper and more abundant funds to lift the assets of their favored voters, and another day they call for the opposite to combat inflation, as inflation destroys the common people and their chances for re-election or continued dictatorial rule. Like science, having a strong belief that can flexibly adjust in trading is beneficial. After the disastrous defeat on April 2, 2025, American Liberation Day, I call for 'only up, no down'! I believe President Trump and his Treasury Secretary, Buffalo Bill Basant, have learned the lesson of trying to change the world’s financial and trade operating system too quickly. To regain popularity, they will distribute money printed by the money press as benefits to those with substantial financial assets (like homes, stocks, and cryptocurrencies). On April 9, Trump played the TACO card, announcing a tariff truce, which seemed like a turnaround from the onset of another Great Depression into the best buying opportunity of the year. Bitcoin rose 21%, and certain alts (mainly Ether) also increased, evidenced by Bitcoin's dominance dropping from 63% to 59%. However, recently, the implied dollar liquidity forecast for Bitcoin has worsened. Since the historic high set in early October, Bitcoin has fallen 25%, with many alts plummeting even more severely than the capitalists in the New York City mayoral election. What has changed? The rhetoric from the Trump administration hasn’t shifted. Trump continues to criticize the Federal Reserve for keeping interest rates too high. He and his deputies keep discussing ways to stimulate the housing market. Most importantly, Trump has conceded to China at every turn, delaying the reversal of trade and financial imbalances between the two economic powerhouses, as the financial and political pain is too great for politicians who must face voters every two to four years. Equally unchanged, and now the market is assigning more weight to dollar liquidity contraction than to the words of politicians. My dollar liquidity index (white) has fallen 10% since April 9, 2025, while Bitcoin (gold) has risen by 12%. Part of this divergence is due to the liquidity-positive rhetoric from the Trump administration. Another part of the divergence comes from retail investors seeing Bitcoin ETF inflows and DAT mNAV premiums as proof of institutional investors wanting Bitcoin exposure. Institutional investors are flooding into Bitcoin ETFs, or at least that’s the story. As you can see, the net inflows from April to October provided sustained buying pressure for Bitcoin, even as dollar liquidity fell. I must add a warning to this chart. The largest ETF (BlackRock's IBIT US) by assets under management uses the ETF as part of a basis trade; they are not going long on Bitcoin. They are shorting Bitcoin futures contracts listed on the CME while buying the ETF to profit from the spread between the two. [1] This is capital efficient, as their brokers typically allow them to use the ETF as collateral for short futures positions. These are the top five holders of IBIT US. They are large hedge funds or investment banks focused on proprietary trading, like Goldman Sachs. The chart above shows the annualized basis gained by these funds through buying IBIT US and selling CME futures contracts. Although the exchange above is Binance, the CME annualized basis is essentially the same. When the basis is significantly above the federal funds rate, hedge funds flood into the trade, creating large and sustained net inflows for the ETF. This gives the impression to those who do not understand the market microstructure that institutional investors have a huge interest in Bitcoin exposure, while in reality, they don’t care about Bitcoin at all; they are just playing in our sandbox for a few extra points of yield over the federal funds rate. When the basis declines, they quickly dump their positions. Recently, as the basis has declined, the ETF complex has recorded significant net outflows. Now retail investors believe these investors do not favor Bitcoin and generate a negative feedback loop affecting their selling, which lowers the basis and ultimately leads to more institutional investors selling ETFs. Digital Asset Treasury (DAT) provides institutional investors with another way to gain Bitcoin exposure. Strategy (ticker: MSTR US) is the largest DAT holding Bitcoin. When its stock trades at a massive premium relative to its Bitcoin holdings (known as mNAV), it allows the company to issue stock and other forms of financing to cheaply acquire Bitcoin. As the premium turns into a discount, Strategy's pace of acquiring Bitcoin slows. This is a cumulative holding chart, rather than the change rate of that variable, but you can see that as Strategy's mNAV premium evaporates, the growth of holdings slows. Bitcoin ETF inflows and DAT purchases have allowed Bitcoin to rise, even as dollar liquidity has contracted since April 9. But this state has ended. The basis is not rich enough to sustain institutional investors buying ETFs, and most DATs are trading at discounts below mNAV, with investors now also avoiding these Bitcoin derivatives. Without these flows masking the negative liquidity picture, Bitcoin must fall to reflect current short-term concerns about whether dollar liquidity will contract or grow as quickly as politicians promise.