US ‘Dollar Liquidity Rug Pull’ Could Trigger Bitcoin To Collapse by 40%, Says Arthur Hayes – Here’s the Timeline

BitMEX co-founder Arthur Hayes is saying that Bitcoin (BTC) could experience a significant price correction over the coming weeks.

Hayes says in a new blog post that a reduction in the US dollar liquidity due to the Federal Reserve ending the Bank Term Funding Program (BTFP) in March will lead to a “vicious washout of all the crypto tourists”.

The BTFP was created in March of 2023 to provide liquidity to banks and other financial institutions to enable them to meet all their depositors’ needs.

According to the BitMEX co-founder, the approval of spot Bitcoin exchange-traded fund (ETF) applications in the US and the subsequent commencement of trading of the products could further exacerbate a Bitcoin sell-off triggered by the reduced dollar liquidity.

“I expect Bitcoin to experience a healthy 20% to 30% correction from whatever level it has attained by early March. The washout could be even more severe if the slate of US-listed spot Bitcoin ETFs has already commenced trading. Imagine if the anticipation of hundreds of billions of fiat flowing into these ETFs at a future date propels Bitcoin above $60,000 and close to its 2021 all-time high of $70,000. I could easily see a 30% to 40% correction due to a dollar liquidity rug pull.”

Hayes says that another potential banking crisis triggered by the ending of the BTFP could force the Federal Reserve to ease monetary policy and consequently help Bitcoin recover its losses.

“The BTFP expires on March 12th, and the Fed rate decision is announced on March 20th. There are six trading days between these two crucial decision points. If my forecast is correct, the market will bankrupt a few banks within that period, forcing the Fed into cutting rates and announcing the resumption of the BTFP.

Bitcoin initially will decline sharply with the broader financial markets but will rebound before the Fed meeting. That is because Bitcoin is the only neutral reserve hard currency that is not a liability of the banking system and is traded globally. Bitcoin knows that the Fed ALWAYS responds with a liquidity injection when things get bad. It might be called something new to confuse those who get their news from TikTok, but rest assured Bitcoin knows printed money in whatever guise is always printed money. Therefore, Bitcoin will rise sharply before and into the Fed’s eventual capitulation to restarting money printer go brrr.”

 

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