BitMEX co-founder Arthur Hayes says Bitcoin’s 2025 underperformance stemmed from shrinking US dollar credit, but expects a sharp reversal in 2026 as Federal Reserve liquidity returns.
At a Glance
- Bitcoin hit a record above $126,000 yet still trailed gold and the Nasdaq last year
- Hayes blames a contraction in dollar liquidity as the “most important force” in 2025
- Fed balance-sheet expansion could inject at least $40 billion per month into markets
- His firm now holds leveraged BTC exposure via Strategy and Metaplanet equities
Why it matters: Hayes’ thesis links Bitcoin’s next leg up to a measurable rebound in fiat liquidity-something traders can track through Fed data and corporate bond issuance.
Liquidity Squeeze Crushed BTC in 2025
Despite printing an all-time high above $126,000, Bitcoin closed 2025 behind both gold and the tech-heavy Nasdaq. Hayes, writing in his essay “Frowny Cloud,” pins the lag on one factor: a tighter US dollar credit environment.
He argues that dollar credit acts as the primary lever for Bitcoin, gold, and US equities. When credit contracts, risk assets feel the pinch. Last year, sovereign nations pivoted away from US Treasuries after Washington froze Russian reserves, channeling funds into gold instead. The resulting surge in bullion prices underscored how geopolitical shocks redirect liquidity.
Hayes notes that while gold and the Nasdaq 100 climbed, Bitcoin underperformed because fiat liquidity dried up. The observation aligns with historical patterns: BTC’s proof-of-work network tends to track broad dollar creation.
Fed Firepower Set to Return
Looking ahead, Hayes sees three catalysts reviving liquidity in 2026:
- Expansion of the Fed’s balance sheet through ongoing money creation
- Reserve Management Purchases (RMP) adding at least $40 billion monthly
- Stronger bank lending and lower mortgage rates as credit conditions ease
He estimates the combined effect will push the Fed’s assets higher, buoying risk assets. Bitcoin, with its fixed supply, historically outperforms when central-bank balance sheets grow.
Leveraged Bet on Equities
Hayes revealed that his family office has built leveraged Bitcoin exposure via equity proxies. The positions center on:
- Strategy (formerly MicroStrategy), a corporate BTC accumulator
- Metaplanet, a Tokyo-listed firm mirroring Strategy’s playbook
He believes both names could outperform spot Bitcoin if the cryptocurrency breaches key price thresholds, thanks to embedded leverage and low float.
Zcash Accumulation Continues
Away from Bitcoin, Hayes continues accumulating Zcash (ZEC). Recent developer departures have not shaken his conviction; he cites an active roadmap and privacy demand as tailwinds for the shielded-transaction coin.
Snow Patterns and Liquidity Flows
Hayes closes the essay by comparing asset prices to snowfall and runoff. Just as melting snow feeds rivers, expanding credit channels liquidity into markets. 2025’s “dry” spell kept BTC subdued, but he expects 2026’s thaw to lift the entire risk complex.
Key Takeaways
- Bitcoin’s 2025 lag was liquidity-driven, not fundamental
- Fed balance-sheet growth of ≥$40 billion/month could reprice BTC sharply higher
- Hayes is positioned via leveraged equities rather than direct crypto holdings
- Sovereign gold buying illustrates how geopolitics redirect fiat flows-next cycle could favor BTC
News Of Los Angeles first reported the details of Hayes’ outlook and positioning.
