Arthur Hayes names the next bull market catalysts: increasing debt and money supply

Arthur Hayes has released a new essay titled “Hallelujah,” and he opens with “Praise be to Lord Satoshi that time and compounding interest exist.”

He sets the tone quickly: governments spend more than they collect, and they do it because taxes are hated and reelection is everything. He lays out a simple point.

A government can pay with savings or with debt. Savings means taxes. Taxes piss people off. So politicians borrow. They borrow now, leave the bill for later, and hope they’re gone before the fallout hits.

Arthur then asks how the buyers of U.S. government debt pay for these bonds. Do they use their own saved money or do they borrow to buy them?

This matters because if the main buyers borrow the money to buy the debt, and the lenders create that money from nothing, then government borrowing directly increases the money supply. And if the money supply grows, then dollar liquidity grows, which affects Bitcoin and the rest of crypto.

Arthur explains who buys U.S. debt

Arthur says to answer the debt question, start with whether the U.S. government will cut taxes. He says the answer is no, pointing out that Trump and Team Red already extended the 2017 tax cuts.

Then the second question: Is the Treasury borrowing to fund the deficit now and continuing in the future? He says yes. Estimates show around $2 trillion in deficits funded by $2 trillion in borrowing each year. So the yearly deficit equals the yearly debt issuance.

He moves on to who buys that debt. Foreign central banks are not the key buyers anymore. He says after the U.S. froze Russia’s reserves in 2022, central banks realized their money could be taken whenever it was politically useful.

So instead of U.S. debt, they are choosing gold. That shift began when Russia invaded Ukraine and gold demand spiked.

Next, the U.S. private sector does not have enough savings to fund the deficit. The U.S. personal savings rate in 2024 was 4.6%, but the deficit was 6% of GDP. That gap means the private sector cannot be the marginal buyer.

Commercial banks are not the answer either. The four largest banks bought around $300 billion in 2025, but the Treasury issued about $1.992 trillion. So they don’t fill the hole.

The buyers are Relative Value (RV) hedge funds based in places like the Cayman Islands.

A Fed paper confirmed they absorbed $1.2 trillion in U.S. treasuries between 2022 and 2024. That was 37% of net issuance. They do this through a trade: buy cash treasuries and sell futures. The profits are tiny, so the only way to make real money is to borrow to finance the trade.

Arthur details how the financing works

RV funds finance the purchases using repo, where they pledge the treasuries to borrow cash overnight. That cash is used to settle the purchase. The interest rate in repo tracks SOFR, the rate the Fed tries to guide between the Upper Fed Funds and Lower Fed Funds.

The Fed controls this through tools:

• RRP pays the lower bound to money market funds.
• IORB pays commercial banks a rate in the middle.
• SRF is the emergency valve. It lends cash at the upper bound when liquidity is tight.

When cash is scarce, SOFR rises. If it rises above the upper bound, the entire leveraged system risks freezing. RV funds cannot fund their trades.

Treasury auctions fail. So the Fed steps in through the SRF, which is effectively printing money in exchange for treasuries.

Arthur calls this Stealth QE. It is not announced. It is not labeled QE. But it creates dollars just the same. And as treasury issuance keeps rising, $2 trillion for deficits and more to roll old debt, SRF usage will keep rising. As SRF balances rise, the global dollar supply expands, and that is fuel for the next Bitcoin bull market.

Before that liquidity returns, the market may feel rough. He says the government shutdown delays spending, which drains liquidity.

The Treasury General Account is about $150 billion above its $850 billion target, which holds money out of markets. This helps explain current crypto weakness.

But Arthur says the four-year Bitcoin cycle is lining up. Some will panic and sell. Especially after altcoin collapses. He says that would be a mistake. The liquidity mechanics do not lie.

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