The Federal Reserve (Fed) last week decided to keep interest rates unchanged at 4.25%-4.5%, maintaining the expectation of two rate cuts in 2025, and announced a slowdown in balance sheet reduction starting from April, reducing the monthly redemption cap for U.S. Treasury bonds from $25 billion to $5 billion, while maintaining the monthly redemption cap for institutional bonds and mortgage-backed securities at $35 billion.
Since then, Bitcoin's trend seems to have bottomed out recently, with the price currently reported at $86,727, rising by 3.6% in the past 7 days and increasing by over 10% from the month's low of $76,600. BitMEX co-founder Arthur Hayes last week asserted that Bitcoin may have bottomed out at $77,000, but the stock market might still have room to fall to force the Fed to implement a more lenient policy:
Powell has fulfilled his promise, QT essentially ends on April 1st. Moving forward, to truly drive the market into a bull market, either the SLR exemption policy needs to be restored or quantitative easing (QE) needs to be restarted.
Has Bitcoin bottomed at $77,000? Possibly, but the stock market may experience more pain before Powell completely shifts to Trump's camp, so stay flexible and keep enough cash.
Arthur Hayes Sees Bitcoin Surging to $110,000
After the weekend, Arthur Hayes today (24th) tweeted again, predicting Bitcoin will first rise to $110,000:
I bet Bitcoin will first rise to $110,000, rather than retrace to $76,500.
The reason is that the Fed is transitioning from quantitative tightening (QT) to quantitative easing (QE) for U.S. bonds, and tariffs are not important because they will only cause "temporary inflation," as Powell said.
I will elaborate on my views in the next article, for now, here's a TikTok brain capacity summary.
Arthur Hayes was previously more pessimistic about Bitcoin's trend. Since last month, he has repeatedly warned that Bitcoin might crash to the $70,000-$75,000 range in Q1 or early Q2, followed by a small financial crisis that would force the Fed to restart the printing press and drive Bitcoin to a historical high of $250,000 by the end of the year. However, the Fed's current actions seem to have significantly changed his perspective.
As the Fed slows down balance sheet reduction, it effectively reduces the liquidity withdrawn from the market, essentially stopping QT. By drastically cutting the monthly bond redemption cap from $25 billion to $5 billion, the Fed is essentially "stabilizing" bond market demand. This operation will lower yields, stabilize risk asset valuations, and the market naturally views it as a loosening signal.
In Arthur Hayes' view, highly sensitive assets like Bitcoin are extremely sensitive to liquidity shifts, and capital reinflow is just a matter of time. Therefore, although the Fed's actions are not traditional QE, the effect is the same and can still convince the market.
