Bitcoin’s recent pullback is not due to weakness in specific cryptocurrencies, but rather to a sharp contraction in dollar liquidity in global markets, Arthur Hayes said.
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Arthur Hayes linked Bitcoin’s pullback to a $300B reduction in USD liquidity rather than crypto-related factors.
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The USDLIQ index has fallen nearly 7% in six months, reflecting tighter financial conditions.
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Hayes said government cash accumulation and reduced liquidity are putting pressure on Bitcoin and other risk assets.
The former BitMEX CEO noted in a post on
Hayes said the U.S. government may be rebuilding cash buffers to fund spending in the event of a possible shutdown, effectively pulling liquidity out of the financial system.
This contraction is visible in the USDLIQ index, which tracks U.S. dollar liquidity conditions.
According to market data shown in Hayes’ post, the index has fallen nearly 7% in the past six months, from a high of nearly 11.8 million points in August to around 10.88 million points in late January.
Hayes believes that Bitcoin’s price weakness over the same period should not be surprising.
“Bitcoin’s decline is not surprising given the decline in U.S. dollar liquidity,” Hayes wrote, tying the move directly to macro forces rather than changes in sentiment in the cryptocurrency market itself.
Liquidity conditions have long been a key driver for Bitcoin and other risk assets, with periods of dollar supply expansion often coinciding with strong rallies.
Conversely, when cash is absorbed into government accounts or financial conditions tighten, speculative assets tend to struggle as leverage weakens and risk appetite weakens.
Hayes’ comments come as Bitcoin has failed to regain momentum after its recent pullback, although some investors are looking for catalysts such as interest rate cuts or renewed flows into spot ETFs.
Instead, focus is turning to macro pipelines, including Treasury cash management and broader dollar supply, as near-term headwinds.
Bitcoin has fallen back below $89,000 after a brief rally as tighter financial conditions and rising geopolitical pressure weighed on risk assets.
XS.com analyst Samer Hasn said that the Federal Reserve’s neutral to hawkish stance, coupled with tensions in the Middle East, has reduced speculative investment demand in the entire crypto market.
