The crypto market suffered a dramatic crash after what seemed like a short-lived recovery following US President Donald Trump’s strategic crypto reserve announcement. While Bitcoin is down by over 10% on Tuesday, the rest of the crypto market cap has slid below $2.8 trillion.
Arthur Hayes, former CEO of BitMEX, argues that Trump’s economic strategy could have a significant impact on Bitcoin and the broader cryptocurrency market.
In his latest blog post, Hayes said that Trump’s approach to financing his “America First” policies will involve extensive debt issuance, which would require the Federal Reserve to increase money supply and lower interest rates. He noted that such conditions have been historically favorable for Bitcoin.
Hayes also outlined how Scott Bessent, Trump’s Treasury Secretary, aims to restructure US debt by extending maturities and reducing yields. He sees this as a “soft default” that lowers real debt burdens.
This, combined with Trump’s push to cut government spending through the Department of Government Efficiency (DOGE), may induce a recession, thereby forcing the Federal Reserve to pivot toward monetary easing. The Fed, led by Jerome Powell, would then be expected to cut rates, halt quantitative tightening, and potentially restart quantitative easing – injecting trillions into the financial system.
Historically, aggressive monetary expansion has been bullish for Bitcoin. Hayes estimates that potential liquidity injections ranging between $2.74 trillion and $3.24 trillion could trigger a Bitcoin rally similar to the post-COVID surge, where the asset’s price multiplied 24 times despite the current struggle.
Given BTC’s larger market capitalization today, Hayes projected a more conservative but still significant 10x increase, which could drive its price toward $1 million during Trump’s presidency.
Bitcoin’s trajectory, according to Hayes, hinges on the interplay between Trump’s fiscal policies and the Federal Reserve’s response – both of which could set the stage for another major crypto bull run.