Arthur Hayes says Bitcoin’s macro outlook is turning bullish again. He argues that wartime spending, U.S. fiscal deficits, and bank-led credit creation could outweigh concerns about a smaller Federal Reserve balance sheet. Speaking at the Bitcoin 2026 conference in Las Vegas, the BitMEX co-founder explained that Bitcoin is increasingly reacting to “wartime inflation,” not just the AI cycle. Hayes framed this shift around a simple idea: governments are openly planning to spend more on defense, and that spending has to be funded somehow. In his view, this puts Bitcoin back in familiar territory as a liquidity-sensitive asset with a hard-money story. “Since the war has started, Bitcoin has outperformed,” Hayes said. “It outperformed NASDAQ and the SaaS stocks. And basically, I think Bitcoin is now focused on wartime inflation.”
The core of Hayes’ argument isn’t that the Fed will suddenly return to explicit quantitative easing. Instead, he focused on what he sees as a likely reshuffling of the balance sheet between the Fed and the commercial banking system. This could allow officials to claim the Fed is shrinking while keeping the broader dollar liquidity picture mostly intact.
Bitcoin vs. the Hawkish Fed Narrative
Hayes addressed market concerns about Kevin Warsh, whom investors see as a potentially hawkish Fed chair because of his criticism of the central bank’s large balance sheet. Hayes said those fears miss the practical limits facing monetary officials when the U.S. government is still issuing massive amounts of debt. “If the market believes there’s going to be less dollar liquidity floating around because of what Warsh will do with the Fed, then they’ll be bearish on Bitcoin and other risk assets,” Hayes said. “This is what we’ve seen in the media talking about a hawkish Fed coming into place after May when Warsh takes over. Now, I don’t believe that’s the case.”
According to Hayes, Warsh would be constrained by the Treasury’s need to keep the bond market working. He argued that the Fed can’t shrink its balance sheet in a vacuum when the U.S. government still has to fund large deficits. “At the end of the day, when you’ve issued $38 trillion of debt and you need to fund the government, the Federal Reserve will do what it’s asked to do—make sure the market is orderly so people can buy this debt,” Hayes said.
The Bank Balance Sheet Trade
Hayes’ main mechanism is a swap: commercial banks reduce their holdings of Fed reserves and replace them with Treasuries and repos. In this scenario, the Fed’s balance sheet can appear smaller on paper, while the banking system absorbs more government debt. “The point of all this is that the net effect on dollar liquidity is neutral,” Hayes said. “Nothing is being sold, nothing is being bought. It’s just a swap. It’s purely a regulatory fiction about who is allowed to hold what.”
That distinction matters for Bitcoin because Hayes says investors should care less about the stated size of the Fed’s balance sheet and more about whether the overall system is creating or destroying dollar liquidity. If debt simply moves from the Fed to regulated bank balance sheets, the impact may be far less restrictive than markets fear.
Hayes linked that transition to U.S. banking deregulation and specifically pointed to changes in the Enhanced Supplementary Leverage Ratio, which he said took effect on April 1. In his view, the rule change allows large banks like JPMorgan and Citibank to absorb more Treasuries and repos, while smaller banks can expand construction and industrial lending. He also cited an S&P Global estimate that the ESLR balance-sheet reduction could generate $1.3 trillion in new loans.Hayes argued that the demand side of the lending cycle is already becoming clear. He said defense spending, production of critical resources, and AI infrastructure are all now national security priorities. This creates borrowers with government-backed demand, making them more attractive to banks.
“Why will banks have demand for loans? One of the criticisms about this analysis from some of my other macro-fans is that they claim the banking system is not creating enough loans or there’s not enough demand,” Hayes said. “Well, we have a great source of demand that is the US Department of War.”
He said banks would lend to defense suppliers, resource miners, and hyperscalers as AI capital spending becomes part of the national security framework. Hayes emphasized that bank lending is especially important because, in his view, it has a higher multiplier effect than central bank lending. He estimated that around $4 trillion in credit could eventually be created, which is the basis for his renewed optimism.
Hayes said his liquidity chart hit bottom in November of last year, around the same time as Bitcoin. He argued that after a period of war-driven uncertainty, the market may now be ready to move higher.
“I think we’ve had a bit of a chop. We’ve had a bit of a war. Now it’s time to break out,” Hayes said. “And that’s why I believe Bitcoin is going higher. I think my end of year choice target is like $125,000, whatever, it doesn’t fucking matter, I’m wrong anyways.”
At press time, Bitcoin traded at $76,628. Featured image created with DALL.E, chart from TradingView.com.
Frequently Asked Questions
Here is a list of FAQs about Arthur Hayess bullish Bitcoin prediction ranging from beginner to advanced
BeginnerLevel Questions
Q Who is Arthur Hayes and why should I care about his Bitcoin prediction
A Hes the cofounder of BitMEX a major crypto exchange Hes a wellknown figure in the industry and his market analysis is followed closely by many traders
Q Is Arthur Hayes saying Bitcoin will definitely hit 125000
A No Hes saying the setup is turning bullish meaning the conditions are favorable for a rise Its a prediction not a guarantee The 125000 figure is his target price
Q What does the setup is turning bullish mean in simple terms
A It means the current economic and market factors are starting to point toward Bitcoins price going up not down
Q Should I buy Bitcoin right now because of this prediction
A Not necessarily Never make an investment decision based on one persons opinion Do your own research and consider your own risk tolerance This is just one data point
Q How soon does Hayes think Bitcoin will reach 125000
A He hasnt given a specific date but he typically looks at a 612 month horizon for his macro predictions Its a mediumterm target
Intermediate Advanced Questions
Q What specific macro factors does Hayes point to for this bullish setup
A He mainly focuses on central bank liquidityspecifically the US Federal Reserves pivot toward cutting interest rates and the Treasurys plan to inject more dollars into the system More dollars usually flow into risk assets like Bitcoin
Q Why 125000 Is there a technical reason for that specific number
A Yes Hayes often references Bitcoins previous cycle highs and key Fibonacci retracement levels 125000 is roughly a 1618x extension from the 2021 alltime high and aligns with the top of his current price channel model
Q What happens if the Fed doesnt cut rates or reverses course