In the ever-evolving landscape of cryptocurrency, Arthur Hayes has a pivotal message for investors and Bitcoin (BTC) HODLers who are fixated on Federal Reserve policy amidst the backdrop of an impending U.S.-China trade deal: shift your focus to the Treasury Department.
As Hayes articulated in a recent interview with CoinDesk, “The real show is at the Treasury Department. Ignore the Fed. It doesn’t matter.” He argues that the influence of the Federal Reserve, led by Jerome Powell, has diminished significantly, regardless of whether it’s under a Democratic or Republican administration.
According to Hayes, the true financial maneuvering is being conducted by Treasury Secretary Scott Bessent, who is actively reshaping global liquidity through a combination of buybacks and innovative auction strategies. These efforts are primarily aimed at managing an ever-increasing U.S. debt burden.
Supportive of his outlook, Hayes predicts that Bitcoin could reach a staggering $1 million by 2028 due to the ongoing influx of liquidity in the market, coupled with the United States’ persistent fiscal irresponsibility. He emphasizes, “All we care about is whether there are more dollars in the system today than yesterday. That’s all that matters.”
However, Hayes cautions that monetary policy is not the sole driver of Bitcoin’s potential rise. He also points to the intricate dynamics of geopolitics, especially the ongoing trade diplomacy between the U.S. and China. Despite the posturing from both nations, Hayes believes that any trade agreement they achieve will appear significant on the surface but ultimately lack substantive impact.
He notes, “It’s going to be a deal on the surface. Trump needs to prove he’s been tough on China. Xi needs to prove that he stood up to the white man.” The reality is that China has demonstrated a robust capacity to endure economic hardship, an insight that informs Hayes’ perspective on future U.S. policy. He suggests that instead of overt tariffs—which come with political risks—the U.S. may resort to taxing foreign investments. This would implicitly serve as a form of capital control, designed to lessen dependence on foreign buyers while maintaining domestic voter support.
Hayes articulates, “The only real policy that actually works is capital controls.” He posits that policymakers have a range of tools at their disposal, from taxes on foreign-held Treasuries and equities to Bold initiatives like forced bond swaps and increased withholding taxes on capital gains from U.S. assets.
This strategic reshaping aims to balance the financial account without compelling Americans to reduce consumption—an option that Hayes dismisses as politically untenable. “Americans don’t like to do hard things,” he explains. “They don’t want to be told that you have to consume less.”
China’s Relentless Pursuit of U.S. Assets
Amidst these discussions, Hayes asserts that China will continue to invest heavily in U.S. assets, despite any public posturing to the contrary. “They have to obfuscate kind of how much stuff they’re buying off of America… but mathematically, they just can’t stop,” he says.
Ultimately, Hayes believes that all these factors converge to create an environment ripe for increased liquidity, which will, in turn, fuel demand for Bitcoin. His investment strategy reflects this outlook, with 60 to 65 percent of his portfolio concentrated in Bitcoin, 20 percent in Ether (ETH), and the remaining balance in what he describes as “quality shitcoins.”
Why this allocation? Hayes asserts that the market is maturing, increasingly seeking out cryptocurrencies that offer tangible utility. “We are in fundamentals season. People are tired of coins that don’t do anything,” he concludes.
