Arthur Hayes Predicts Bitcoin Rally as Treasury’s Bond Buyback Strategy Boosts Dollar Liquidity

In a recent Substack post, Arthur Hayes argued that Treasury Secretary Scott Bessent’s decision to double long-dated bond buybacks is creating the same dollar liquidity conditions that sent Bitcoin surging in late 2023.

“Bitcoin obviously got the message because it is the global liquidity smoke alarm,” Hayes wrote in the post. “If Bessent is Yellen 2.0 then Bitcoin is about to go on a monster run off the lows.”

The Yellen parallel

Hayes argues that both Yellen and Bessent faced the same structural problem, a 10-year Treasury yield threatening to breach 5%.

At that level, Hayes writes, “consumer and corporate financing become prohibitively expensive, and economic activity slows down.” Both secretaries responded with what Hayes calls “clever money printing stratagem.”

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. Bitcoin and the Nasdaq pumped.

The 10-year yield retreated from 5%. Bessent’s equivalent move came on Aug 19, when he announced he would double long-dated bond buybacks, increasing the quarterly total by $20 billion.

Hayes is direct about why the 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.”

The bull market call

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

“Buy Bitcoin or your favorite shitcoin, and sit tight, and let Bessent cook,” he wrote.

At the time of writing, Bitcoin was trading at approximately $79,000 according to Decibel. Hayes’s post landed as the rally was already underway. His argument is that it has further to run, for the same reason the 2023 rally ran further than most people expected.

The mechanism is the same. The Treasury secretary is different. The outcome, Hayes argues, will not be.

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