Analysis of Bitcoin's Recent Price Movements
Former BitMEX CEO Arthur Hayes attributes Bitcoin's recent price decline to reduced dollar liquidity rather than diminished government support or institutional investors' existing positions. The seasoned market analyst wrote Monday that Bitcoin serves as the free-market weathervane of global fiat liquidity.
Bitcoin dropped below $90,000 Tuesday morning, hitting a seven-month low one day after erasing all 2025 gains. Hayes believes Bitcoin reaching the low $90,000s while the S&P 500 and Nasdaq 100 near all-time highs signals a brewing credit event.
Hayes noted Bitcoin rose since April despite falling USD liquidity by his combined metrics. The Trump-pardoned crypto founder believes institutional buy-ins with high ETF inflows and liquidity-positive rhetoric from the Trump administration propped up prices during this period.
Potential Future Scenarios and Market Drivers
The analyst argues that if stocks experience a 10% to 20% correction with interest rates staying near 5%, the U.S. government will move to print more dollars. Hayes thinks this liquidity boost could push Bitcoin toward $200,000 to $250,000 by year's end if broader risk markets implode.
ETF Outflows and Institutional Trading Strategies
ETFs faced historic outflows in recent months, with BlackRock's IBIT logging a record $463 million one-day outflow on Nov. 14. Crypto funds internationally saw $2 billion in weekly collective outflows.
Hayes links this decline to how five of IBIT's largest holders are hedge funds and investment firms like Goldman Sachs and Jane Street using the ETF for basis trades. These trades involve taking a position in one asset and the opposite position in a related futures contract.
Traders buy a Bitcoin ETF and short a Bitcoin future, profiting when the price difference narrows. JPMorgan estimated in April that $400 billion was locked in basis trades across the financial services industry.
Retail Investor Misinterpretation and Market Feedback Loop
Hayes argues retail investors misinterpret institutional behavior, as these actions reflect the viability of specific trades rather than faith in Bitcoin's future price. He said retail investors selling creates a negative feedback loop that decreases the basis, causing more institutional investors to sell the ETF and perpetuating the cryptocurrency market decline.