In brief
- Arthur Hayes claims that Bitcoin is being negatively impacted by lower U.S. dollar liquidity.
- The market analyst argued that Bitcoin has been propped up this year by hedge funds performing “basis trades” with Bitcoin ETFs, such as BlackRock’s IBIT.
- He feels that Bitcoin could fall further before booming—if the US government increases the money supply.
Arthur Hayes, a seasoned market analyst and former CEO of crypto exchange BitMEX, has chalked up Bitcoin‘s recent price plunge to reduced dollar liquidity, instead of factors like government support or institutional investors no longer “being long on Bitcoin.”
“Bitcoin is the free-market weathervane of global fiat liquidity,” he wrote Monday. “It trades on the expectation of future fiat supply.”
Bitcoin dropped below $90,000 on Tuesday morning, hitting a seven-month low—one day after erasing all of its 2025 gains. Hayes believes that BTC hitting the low $90,000s while the S&P 500 and Nasdaq 100 stock indexes near all-time highs means that a “credit event is brewing.”
Hayes argues that if stocks have a “10% to 20%” correction and interest rates stay near 5%, then the U.S. government will move to print more dollars. He thinks this liquidity boost could mean Bitcoin will “zoom” towards a price of $200,000 to $250,000 by year’s end “if the broader risk markets implode, and the Fed and Treasury accelerate their money printing capers.”
Hayes noted that Bitcoin had previously risen since April, despite USD liquidity falling by his own combination of metrics. The Trump-pardoned crypto founder believes this is due to institutional buy-ins propping it up with high ETF inflows, as well as “liquidity-positive rhetoric from the Trump administration.”
ETFs have been hit with historic outflows in recent months. Last week, BlackRock’s market-leading Bitcoin Trust ETF (IBIT) logged a record $463 million one-day outflow on November 14, while crypto funds internationally collectively saw $2 billion in weekly outflows.
Hayes links this decline to how five of the largest holders of BlackRock’s IBIT US, the world’s largest Bitcoin ETF, are hedge funds and investment firms like Goldman Sachs and Jane Street that use it as part of something known as a “basis trade.”
In this type of trade, traders take a position in one asset and the opposite position in a related futures contract—for example, buying a Bitcoin ETF and shorting a Bitcoin future. Traders then make a profit when the difference between the asset and futures prices narrows.
“The largest holders of the biggest ETF by assets-under-management (AUM) (BlackRock’s IBIT US) use the ETF as part of a basis trade; they are not long Bitcoin,” said Hayes. “They short a CME-listed Bitcoin futures contract vs. buying the ETF to earn the spread between the two.”
He added: “This is capital-efficient because their broker usually allows them to post the ETF as collateral against their short futures position.”
Basis trades are a huge part of the financial services industry. JPMorgan estimated in April that there was $400 billion locked in that type of trade.
As Bitcoin is recently in decline, the “basis” of these trades is lower, meaning fewer ETF inflows as they look less profitable. Hayes argues that retail investors are misinterpreting the behavior of these institutional investors, whose actions don’t represent faith in Bitcoin’s future price as much as the viability of this specific type of trade.
“Now retail believes these same investors don’t like Bitcoin, creating a negative feedback loop that influences them to sell, which decreases the basis, finally causing more institutional investors to sell the ETF,” he said.
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