BitMEX co-founder Arthur Hayes wrote an article at the end of January, predicting that Bitcoin could plummet to the $70,000 to $75,000 range in Q1 or early Q2, but with the outbreak of a small financial crisis this year, the Federal Reserve will be forced to restart the printing press, pushing Bitcoin to $250,000 by the end of 2025.
And against the backdrop of Bitcoin reaching $90,850 on this (25th) day, Arthur Hayes reiterated in X his prediction that Bitcoin will correct significantly to $70,000, and explained why some hedge funds holding the Bitcoin spot ETF $IBIT may be the trigger for this bull market pullback.
The Bitcoin Goblin Town is about to arrive:
Many $IBIT holders are hedge funds, who earn higher returns than their investments in short-term U.S. Treasuries by going long (on Bitcoin) ETFs and short CME futures.
If BTC falls and the basis (the price difference between the spot and futures markets) narrows, these funds will sell $IBIT and buy back CME futures. Since these funds are in a profit-making position and given that the basis is close to the U.S. Treasury yield, they will unwind their positions during U.S. trading hours to realize their profits.
I see the prospect of Bitcoin falling to $70,000.
Why will Bitcoin correct 30% in the short term?
Regarding Arthur Hayes' short-term bearish analysis, in his January-end article titled The Ugly, he explained in depth why he believes Bitcoin has a 60% chance of a 30% correction:
Because Bitcoin is highly correlated with the U.S. stock market in the short term, the 30-day correlation between Bitcoin and the Nasdaq 100 index is rising, which is very unfavorable for the short-term price trend.
Especially as the upward pressure on the 10-year U.S. Treasury yield continues to increase, the stock market may further correct, and Bitcoin, as a liquidity-sensitive asset, may fall before stocks.
Bitcoin prices will fall back to the $70,000 to $75,000 range, giving back the gains brought about by Trump's re-election (commonly referred to as the "Trump Bump"). The magnitude of this correction is about 30%, which is a common phenomenon in the Bitcoin market that is in a bull market.
In addition, he also pointed out that the AI model DeepSeek developed by China will cause investors to re-evaluate their optimistic expectations for U.S. tech stocks, and further trigger concerns about the fiat liquidity environment and the 10-year Treasury yield. This skepticism may have a chain reaction on Bitcoin, driving a short-term correction.
Further reading: Arthur Hayes predicts: DeepSeek triggers Bitcoin to drop to $70,000! Surge past $250,000 by year-end
A small financial crisis will drive Bitcoin to $250,000 by the end of the year
He pointed out that the core problem facing the global financial market at the moment is the tightening of fiat liquidity. The three major economies of China, the United States, and Japan have not accelerated money printing, leading to a lack of market liquidity and downward pressure on asset prices.
He predicts that as the 10-year Treasury yield continues to rise (currently around 4.39%), when it reaches between 5% and 6%, it may trigger a small financial crisis, which will then force the Federal Reserve to "join Trump's camp" and restart the printing press to alleviate market pressure. Subsequently, the People's Bank of China will also join the liquidity injection, using the advantage of the stable exchange rate between the U.S. dollar and the Renminbi to stimulate the economy simultaneously.
This small financial crisis will actually bring the much-needed "monetary magic" to the Bitcoin market, that is, the support of ample liquidity.
Hayes predicts that Bitcoin may reach its lowest point of correction in Q1 or early Q2 of 2025. Subsequently, with the outbreak of a small financial crisis, the Federal Reserve will be forced to stop quantitative tightening (QT) and initiate quantitative easing (QE) and other stimulative measures. These policies will inject liquidity support into the Bitcoin market and drive it to a historic high of $250,000 before the end of the year.
