Hayes: Bessent's Liquidity Plan Will Fuel Bitcoin Rally

Arthur Hayes, co-founder of BitMEX, believes that Bitcoin's rally could continue due to increased dollar liquidity. He points out that US Treasury Secretary Scott Bessent is preparing to inject more liquidity into the market through Treasury operations.

Hayes' argument relies on his previous thesis that when policymakers inject liquidity to keep Treasury yields under control, Bitcoin and other risk assets tend to benefit. He notes that in December 2023, Yellen boosted the issuance of short-term Treasury bills compared to long-duration bonds, allowing money market fund balances to move from the Fed's Reserve Repo program to T-bills.

Hayes estimates that this $2.4 trillion movement was a liquidity injection that flowed into financial markets and saw Bitcoin rally along with the Nasdaq 100. He believes that Bessent is attempting something similar through the Treasury's debt-management tools, including increasing buybacks from $2 billion to at least $4 billion per operation.

Hayes expects more liquidity due to the Treasury Secretary's planned purchases being too small relative to the $40 trillion US debt stock. He also sees another possible source of liquidity in the Treasury General Account (TGA), which is at approximately $1 trillion, and a CNBC report suggesting that Bessent could drain the TGA to fund additional buybacks.