Crypto Isn’t Topping Yet: Arthur Hayes Says Stealth QE Is Near

Arthur Hayes predicts a crypto bull market fueled by the Federal Reserve's "stealth" quantitative easing (QE) through the Standing Repo Facility (SRF). He argues that persistent US fiscal deficits will necessitate increased Treasury debt issuance. Foreign central banks and US households are unlikely to absorb this debt, leaving hedge funds as marginal buyers utilizing repo funding. The SRF will then act as a backstop to maintain stable leverage rates when demand exceeds available liquidity. This SRF usage effectively prints money to finance government spending, despite QE's unpopularity, Hayes contends. This "stealth QE" will increase the dollar supply, driving up Bitcoin and cryptocurrency prices. Hayes notes a temporary liquidity drain due to the government shutdown but believes persistent SRF usage signals a true shift. He emphasizes that Treasury debt issuance equals an increased supply of dollars, which impacts the Crypto market. He advises watching money-market microstructure with the SRF balances as a crucial indicator. The key is to track the SRF balances, as increasing balances indicate dollar liquidity growth. Hayes suggests husbanding capital for a choppy market until stealth QE begins.