Arthur Hayes Says Bitcoin Rally Depends on Liquidity Surge

Hayes argues that Bitcoin’s underperformance in 2025 was driven by tightening dollar liquidity rather than structural weakness, and expects looser monetary conditions in 2026 to support new all-time highs. That outlook is beginning to align with market sentiment, as the Crypto Fear & Greed Index has flipped back into “greed” for the first time since the $19 billion October liquidation event. The sentiment rebound also coincided with a strong Bitcoin rally toward the $97,000 level.

Hayes Sees Bitcoin Reversal Ahead

Bitcoin is likely to reach new all-time highs despite its weak relative performance against gold and technology stocks last year. This is according to Arthur Hayes, who argues that the decisive factor will be a renewed expansion in US dollar liquidity. 

In a post that was published on Wednesday, Hayes said Bitcoin’s struggles in 2025 should not be misinterpreted as a structural failure of the asset, but rather understood as a temporary outcome of tightening monetary conditions. In his view, Bitcoin’s long-term trajectory is still closely tied to the availability of liquidity and the pace of fiat currency debasement.

Arthur Hayes

Hayes explained that while gold and US technology stocks benefited from favorable capital flows, Bitcoin lacked the necessary “juice” because dollar liquidity declined throughout much of last year. He argued that for Bitcoin to regain momentum and decisively break to new highs, liquidity conditions must loosen. According to Hayes, that shift is likely to occur in 2026, driven by several potential catalysts, including an expansion of the Federal Reserve’s balance sheet, lower mortgage rates, and a renewed willingness by commercial banks to extend credit to industries backed by the US government.

A central theme of Hayes’ argument is that monetary expansion is inherently bullish for Bitcoin, as investors tend to rotate into risk assets when they expect inflation and currency debasement to erode the purchasing power of the US dollar. He explained that Bitcoin’s 2025 decline mirrored the contraction in liquidity, while other asset classes diverged. 

In contrast, the Nasdaq continued to rise, which Hayes attributed to the effective “nationalization” of artificial intelligence by both the United States and China. He said government support, executive orders, and strategic investment overrode normal market signals, allowing capital to flow into AI-related sectors regardless of traditional return metrics.

Hayes also linked future liquidity expansion to geopolitical factors, and argued that sustained US military spending will require extensive financing through the commercial banking system. This, he suggested, would further support looser monetary conditions over time. Against this backdrop, Hayes dismissed concerns over Bitcoin’s underperformance in 2025, when it fell more than 14% while gold surged over 44% and technology stocks led the S&P 500 with strong gains.

BTC’s price action over the past year (Source: CoinCodex)

Ultimately, Hayes framed Bitcoin as a form of “monetary technology” whose value is directly related to the scale of fiat currency debasement.

Crypto Sentiment Returns to Greed

Meanwhile, crypto investor sentiment shifted back into “greed” territory for the first time since the massive $19 billion liquidation event in October that sent fear rippling through digital asset markets. The Crypto Fear & Greed Index posted a reading of 61, which is a big  improvement after several weeks spent in “fear” and “extreme fear.”

Crypto Fear and Greed Index

The rebound follows a prolonged period of pessimism that began on Oct. 11, when roughly $19 billion was wiped from crypto markets in a single liquidation cascade. In the weeks that followed, the index plunged to some of its lowest levels on record, repeatedly printing low readings throughout November and December. 

The recent improvement in sentiment coincided with a renewed rally in Bitcoin, which has climbed sharply over the past week. Bitcoin rose from around $89,800 to reach a two-month high close to $97,700 on Wednesday, according to data from CoinCodex. The last time Bitcoin traded above $97,000 was in mid-November. Ironically the fear and greed index was still stuck in “extreme fear.” 

The Crypto Fear & Greed Index aggregates several indicators to assess market mood, including price volatility, trading volume, momentum, Google search trends, and sentiment expressed across social media platforms. Traders often use the index as a contrarian or confirmation signal when deciding whether to buy, sell, or stay on the sidelines.

Despite improving prices and sentiment, on-chain data suggests some retail participants are still exiting the market. Analysts at Santiment pointed out that Bitcoin has seen a net decline of more than 47,000 holders over the past three days, attributing the move to fear, uncertainty, and impatience among smaller investors. However, Santiment described this as a potentially bullish development as declining numbers of non-empty wallets often signal capitulation by the crowd.