Former BitMEX CEO Arthur Hayes has outlined a volatile forecast for Bitcoin, suggesting the cryptocurrency could fall to $80,000 before a dramatic recovery sends it toward $250,000 by the end of the year. He argues that the recent price decline below $90,000 isn’t a sign of waning institutional interest but rather a direct result of shrinking U.S. dollar liquidity.

A Weathervane for Global Liquidity

According to Hayes, this signals that a “credit event is brewing.” He predicts that a 10% to 20% correction in the stock market, combined with interest rates holding around 5%, would likely compel the U.S. government to increase the money supply. This injection of liquidity, he believes, is the catalyst that could send Bitcoin “zooming” toward the $200,000 to $250,000 range.

ETF Outflows Driven by Trading Strategy, Not Sentiment

While institutional support through Bitcoin Exchange-Traded Funds (ETFs) initially bolstered the price, recent record outflows have painted a different picture. BlackRock’s IBIT fund, a market leader, saw a staggering $463 million outflow in a single day on November 14, contributing to over $2 billion in weekly outflows from crypto funds worldwide.

However, Hayes explains that these movements are misleading if interpreted as a loss of faith in Bitcoin. He notes that major IBIT holders, including firms like Goldman Sachs and Jane Street, primarily use the ETF for basis trades. This strategy involves buying the ETF while simultaneously shorting a related futures contract to profit from the price difference, or spread, between the two.

“They short a CME-listed Bitcoin futures contract vs. buying the ETF to earn the spread,” Hayes wrote, noting that brokers allow the ETF to be used as collateral, making the trade highly capital-efficient.

Retail Investors Misreading the Signals

The core issue, according to Hayes, is that retail investors misinterpret these complex institutional maneuvers. When hedge funds unwind their basis trades and reduce their ETF positions, many smaller investors see it as a bearish signal and begin to sell their own holdings. This selling pressure creates a negative feedback loop, further reducing the profitability of the basis trade and prompting more institutional selling.

Hayes remains skeptical that Bitcoin will follow its traditional four-year cycle. He believes the market must first align with liquidity fundamentals, which may require a deeper price correction. In his view, a new all-time high will only be possible after markets “puke enough to speed up the pace of money printing,” forcing policymakers to provide the monetary easing needed for the next major rally.

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