Potential Impact of U.S. Financial Policies on Bitcoin and Crypto Markets

According to Odaily, Arthur Hayes has suggested that the actions of the U.S. Treasury and Federal Reserve may be setting the stage for a 'Stealth QE' (Quantitative Easing), which could serve as a key catalyst for a new surge in Bitcoin and the broader cryptocurrency market. Currently, U.S. government spending is expanding, with political incentives favoring debt issuance over tax increases. Due to the risk of dollar asset seizures following the Russia-Ukraine conflict, foreign central banks are more inclined to purchase gold rather than U.S. Treasury bonds. Domestic savings rates in the U.S. are insufficient to support the issuance of government bonds, and the four major commercial banks have absorbed only a small portion of new debt. 'Relative Value (RV) hedge funds' have become marginal buyers of U.S. debt, primarily using repo agreements for leveraged financing. The U.S. Treasury is expected to issue approximately $2 trillion in new debt annually to cover deficits. When market liquidity tightens and the Secured Overnight Financing Rate (SOFR) exceeds the federal funds ceiling, the Federal Reserve injects cash directly into the market through the Standing Repo Facility (SRF). This is akin to 'disguised QE': printing money, lending, and supporting the Treasury market. As the use of the SRF increases, global dollar liquidity rises, effectively functioning as QE. Hayes predicts this will reignite a bull market cycle for Bitcoin and cryptocurrencies. 'Whenever the Federal Reserve expands its balance sheet, BTC tends to rise.' Currently, the U.S. government shutdown and Treasury auctions are causing short-term liquidity tightening, putting pressure on the crypto market. Hayes advises investors to 'preserve capital and wait for the right opportunity,' suggesting that the market will experience a strong rebound once 'Stealth QE' is initiated.