2025 was brutal for Bitcoin, but Arthur Hayes sees a liquidity-driven recovery on the horizon

Hayes revealed that his firm had Bitcoin exposure through Strategy and Metaplanet, amid expectations that liquidity conditions would improve.

Despite reaching an all-time high of over $126,000, 2025 ended on a gloomy note for Bitcoin (BTC). In fact, crypto assets lagged behind gold and the Nasdaq over the same period.

BitMEX co-founder Arthur Hayes cited declining US dollar lending as the main cause of the underperformance.

Tight dollar credit

In his final essay, “Frowny Cloud,” Hayes says attributed Bitcoin’s weakness last year was mainly reflected in a contraction in US dollar liquidity. He explained that dollar credit, described as the “key force in 2025,” had a direct impact on the price dynamics of Bitcoin, gold and US stocks. He noted that while gold and the Nasdaq 100 rose during the year, Bitcoin underperformed against these assets due to the decline in fiat liquidity.

The prominent market observer added that sovereign countries have increased their purchases of gold in response to geopolitical risks and US policy actions, including restrictions on Russian government bonds. These countries sought to reduce exposure to US government bonds, ultimately accelerating gold purchases and strengthening its role as a global reserve.

Looking ahead to 2026, Hayes expects a recovery in US dollar liquidity, driven by several factors. First, he expects an expansion of the Federal Reserve’s balance sheet through continued money creation and Reserve Management Purchases (RMP). According to his estimates, this will inject at least $40 billion per month into the system.

This expected increase in dollar liquidity could provide support for risky assets, including Bitcoin, as the central bank’s balance sheet grows and credit activity increases. He noted that BTC’s value has historically correlated with fiat monetary expansion, as the proof-of-work blockchain benefits from a greater supply of US dollars. Hayes suggested that with liquidity set to grow in 2026, Bitcoin could follow the upward trend established by other assets during periods of credit growth.

2026 could look very different

Hayes also said his firm has positioned itself for exposure to Bitcoin through equity instruments in companies like Strategy and Metaplanet, which he believes could outperform Bitcoin if the cryptocurrency were to rise above key price levels. He additionally observed the continued accumulation of Zcash (ZEC) and expressed confidence in the project’s development roadmap despite the recent departure of developers.

You might also like:

He compared Bitcoin and other assets to snow patterns and liquidity flows. Hayes concluded that while Bitcoin underperformed in 2025, the expected rise in US dollar credit in 2026, including growth in the Fed’s balance sheet, stronger bank lending and lower mortgage rates, could provide renewed support for the cryptocurrency and other risk assets.