BitMEX founder Arthur Hayes recently shared his latest market insights, pointing out that the U.S. government shutdown-induced fiscal liquidity freeze is becoming a significant driver of the current crypto market's weakness. He explained that the U.S. Treasury is currently in a "borrowed but unspent" state, continuously absorbing market funds by issuing Treasury bonds, but these funds are not immediately injected into the economic cycle. According to data, the Treasury General Account (TGA) balance has exceeded the original target of $850 billion by approximately $150 billion. This means that a portion of dollar liquidity that should have flowed into the market is temporarily "locked" in fiscal accounts, failing to provide sufficient funding support for risk assets.
Hayes believes that the direct consequence of this phenomenon is a tightening of liquidity in global risk markets. Particularly in the cryptocurrency market, dollar liquidity is one of the core drivers of price fluctuations. When the Treasury absorbs excessive dollars and fails to release them in a timely manner, a "liquidity vacuum" naturally occurs in the market. He predicts that this situation will persist until the U.S. government resumes normal operations, exerting downward pressure on the prices of Bitcoin and major tokens.
However, Hayes also reminded investors that the current market downturn does not signify the end of the bull market. Many traders may mistakenly interpret this period of volatility as a market top, leading them to panic-sell their holdings. But he pointed out that this is a typical misjudgment. In reality, the operational mechanisms of the dollar money market determine that this "liquidity tightening" is only temporary. Once the government reopens and fiscal expenditures resume, the frozen funds will be reinjected into the market, leading to a "rebound release" of liquidity, injecting new vitality into risk markets, including crypto assets.
Hayes further emphasized that the U.S. Treasury's funding needs remain substantial. In addition to issuing approximately $2 trillion in Treasury bonds annually to maintain government operations, it also needs to refinance a large amount of maturing debt. This high-frequency debt rolling means that the supply and demand dynamics of dollar liquidity are in a tense state. However, the "stealth QE" implemented by the Federal Reserve through tools such as the Standing Repo Facility (SRF) is expected to soon take effect, alleviating market liquidity tightness.
From a macro perspective, Hayes' views reveal the high degree of linkage between the crypto market and the traditional financial system. Every fine-tuning of U.S. fiscal and monetary policies triggers chain reactions on digital asset prices. When market funds are drained and risk appetite declines, the crypto market is the first to bear the pressure; when liquidity is released again, it often becomes the earliest sector to rebound.
Therefore, he advises investors to remain calm and patient at this stage and not be misled by short-term fluctuations. The true market turning point often occurs when liquidity flows back. In other words, the current silence may well be the "accumulation period" before the next market rally begins.
