Bitcoin Set to Surge as Dollar Liquidity Conditions Mirror Late 2023 Rally

Arthur Hayes, founder of Maelstrom, believes that Treasury Secretary Scott Bessent's decision to double long-dated bond buybacks is creating a similar dollar liquidity surge that propelled Bitcoin in late 2023.

Hayes argues that both Yellen and Bessent faced the same structural problem: a 10-year Treasury yield threatening to breach 5%, which would make consumer and corporate financing prohibitively expensive, slowing down economic activity.

Hayes notes that both secretaries responded with what he calls 'clever money printing stratagems.' Yellen's move in late 2023 was to issue more Treasury bills than bonds, draining $2.4 trillion from the Federal Reserve's Reverse Repo Program into financial markets, causing Bitcoin and the Nasdaq to pump, and the 10-year yield to retreat.

Bessent's equivalent move came on August 19, when he announced he would double long-dated bond buybacks, increasing the quarterly total by $20 billion. However, Hayes is direct about why this move was insufficient on its own: 'With a total debt stock of $40 trillion, another $20 billion of buying is like pissing in the wind.'

Hayes says his fund Maelstrom is at maximum risk and that whether Bessent pumps fast or slow, Bitcoin will continue to rally. He flags one caveat: volatility will be severe enough that leverage is dangerous for anyone who is not a full-time trader.