Video Title: The Godfather Of Crypto Trading: My Final Warning To Bitcoin Holders
Video Source: Altcoin Daily
Translation: Peggy, BlockBeats

Editor's Note: On August 19, the U.S. Department of the Treasury announced that effective September 9, the single-round liquidity support repurchase limit for 10- to 30-year Treasury bonds would be increased from $20 billion to at least $40 billion. While the scale of this policy relative to the over $30 trillion U.S. bond market is not large, following the announcement, long-term Treasury bond yields quickly fell, the U.S. dollar weakened, and Bitcoin surged back above $70,000.

This rebound has sparked two interpretations. One attributes it to Trump's push for crypto market structure legislation, while the other believes that the true market price driver is the U.S. Treasury's sensitivity to the rise in long-term rates. In other words, what investors are trading on may not be the $40 billion repurchase itself, but rather what actions the Treasury and the Fed will take after the continued rise in Treasury bond yields.

In his interview with Altcoin Daily, Arthur Hayes chose the latter explanation. In his view, Bitcoin is a "pressure relief valve" for global liquidity changes: when the market begins to worry that the U.S. will engage in larger-scale buybacks, Fed balance sheet expansion, or yield curve control to suppress long-term borrowing costs, scarce assets will once again attract buying pressure.

Related Reading: "Arthur Hayes's Latest Interview: ETH to Reach $30,000; FLOP to Surpass ETH"

This is still a set of macro deductions with a distinct personal stance. The Treasury emphasizes that the goal of the repurchase is to improve market liquidity for long-term Treasuries, not to directly release currency; the Fed has also not announced yield curve control. Whether Hayes's judgment holds true ultimately depends on whether the repurchase continues to expand, whether long-term rates once again approach the policy pressure zone, and whether the Fed truly expands its balance sheet.

Below is a compilation of the original article's key information:

On August 19, the U.S. Department of the Treasury announced that the single-round liquidity support repurchase scale for 10- to 20-year and 20- to 30-year nominal coupon Treasury bonds would be increased from a maximum of $20 billion to at least $40 billion. The new arrangement will take effect on September 9 and last until November 4.

Prior to the announcement, the U.S. 30-year Treasury bond yield briefly rose to around 5.34%, hitting a new high since 2007. After the announcement, long-term Treasury bond yields fell by about 10 basis points, and the dollar weakened accordingly. Bitcoin subsequently surpassed $70,000 for the first time since June, with related crypto stocks generally rising.

In an interview with Altcoin Daily, Arthur Hayes pointed out that the key driver of Bitcoin's surge was not within the crypto industry itself, but in the U.S. Treasury bond market.

$4 Billion Is Insignificant; the Market Trades Policy Signals

The U.S. Treasury Department increasing the size of single long-term bond repurchases from $20 billion to at least $40 billion is not sufficient to significantly alter the supply-demand dynamics of the Treasury bond market. Hayes also acknowledged that this move is not capable of directly creating substantial liquidity.

He is more focused on the timing of the announcement of the repurchase expansion.

After a sell-off in long-term Treasury bonds and the 30-year yield rising to a near two-decade high, the Treasury Department swiftly intensified its repurchase efforts. In Hayes' view, this demonstrated to the market the policy department's "pain point" regarding long-term rates: when rising yields begin to threaten government funding costs and financial market stability, the Treasury Department may take more aggressive action.

"The scale is not astonishing, but it is a signal," Hayes stated.

The Treasury's formal definition of this operation is "Liquidity Support Repurchase," mainly used to repurchase older bonds with poor liquidity to improve trading conditions in the Treasury bond market. This is not equivalent to Fed quantitative easing and does not necessarily increase the net dollar amount in the market.

Therefore, more accurately, the repurchase announcement did not directly prove that the U.S. has restarted "printing money," but it reinforced a market expectation: if long-term rates continue to spiral out of control, policy tools may be further escalated.

Hayes's Bitcoin Logic: From U.S. Bond Pressure to Liquidity Expansion

Hayes sees Bitcoin as the most direct "pressure release valve" when central banks expand the money supply.

His logic can be broken down into three steps: U.S. debt and interest payments continue to rise, the Treasury Department needs to maintain the financing ability of the Treasury market; if there is a lack of demand for long-term Treasury bonds and yields keep rising, policy departments may stabilize the market through expanded repurchases or other tools; once these operations ultimately lead to an increase in dollar liquidity, the fixed supply of Bitcoin could be a potential beneficiary.

Within this framework, Bitcoin's rise does not come from $4 billion in repurchases flowing directly into the crypto market but from investors trading ahead of a future more accommodative liquidity environment.

Hayes believes that what really needs attention is yield curve control. It refers to the policy department maintaining the government bond yield near a target level through measures such as buying specific maturity bonds. The U.S. has not implemented this policy yet, but Hayes predicts that if long-term yields continue to rise, the market will heighten its expectations of implicit or explicit yield curve control.

He further stated that once the market confirms the Fed's large-scale balance sheet expansion, Bitcoin could quickly enter the "hundreds of thousands of dollars" range. He expects Bitcoin to rise to around $126,000 by the end of the year; if the policy significantly shifts towards yield curve control, it could surge even faster to $500,000.

More Aggressive Speculation: Foreign Holders Sell, Fed Steps In

Compared to Treasury buybacks, Hayes is more focused on the FIMA Repo Facility, which stands for "Foreign and International Monetary Authority Repo Facility."

This tool allows eligible foreign central banks and international institutions to obtain U.S. dollar liquidity from the Fed by pledging their U.S. Treasury holdings as collateral. Hayes speculates that Japan and European countries may need to sell some U.S. assets in the future to repatriate funds for fiscal, defense, and social spending. If the main foreign holders of U.S. bonds transition from buyers to sellers, long-term bond yields could face further pressure.

In his scenario, the U.S. could expand the FIMA repo facility, enabling foreign official institutions to exchange U.S. bonds for dollars, sell the dollars in the foreign exchange market, and buy back their local currency. This approach could alleviate direct selling pressure on the U.S. bond market and potentially absorb some liquidity demand through the Fed's balance sheet.

However, this part mainly represents Hayes's speculation on the future policy path. Existing public information has not confirmed that the Fed will lift the transaction limits on the FIMA tool, nor has it announced unlimited acceptance of foreign investors' U.S. bond sales through this tool.

Therefore, the "infinite money printing" mentioned by Hayes has not occurred. It signifies an extreme scenario that he believes the policy may eventually evolve towards.

Why Is Bitcoin More Important Than Regulatory Clarity?

During the interview, Altcoin Daily also inquired about the impact of U.S. crypto market structure legislation on the market. Hayes was cautious in his assessment and even believed that the CLARITY Act is not crucial for Bitcoin's price.

The CLARITY Act seeks to clarify whether digital assets are considered securities or commodities and delineate the regulatory authority between the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission. For companies needing to raise funds in the U.S., issue tokens, and operate trading businesses, clear regulatory boundaries do have practical significance.

However, Hayes believes that Bitcoin, which has been operating since 2009, does not rely on a regulatory framework specially established by the United States. Instead of a congressional encryption bill, the impact of how the U.S. Treasury and the Federal Reserve handle debt, interest rates, and dollar liquidity is more direct on Bitcoin's valuation.

This assessment also explains his attribution to this round of the market. The push for the CLARITY Act by Trump and the Treasury's expansion of repurchases occurred almost simultaneously, both of which could have improved market sentiment. However, Hayes believes that the variable that truly caused Bitcoin to rebound quickly was investors starting to reassess the U.S. policy sector's tolerance for long-term interest rates.

Reuters cited analyst views stating that the Treasury's operations are relatively limited in scale and the relief to the bond market is also temporary. However, against the backdrop of a narrow trading range and accumulation of short positions, this signal triggered a short-covering rally in the crypto market, amplifying the price surge.

This means that the Bitcoin rally can be explained by multiple factors: the drop in U.S. bond yields reduced the opportunity cost of risk assets, a weaker dollar improved the liquidity environment, regulatory news boosted industry expectations, and short-covering magnified short-term volatility. Attributing the entire rally to Treasury repurchases would similarly overstate the impact of a single event.

What to Watch Next: Long Bond Yields Near 5%

Hayes' key indicator to watch is not Bitcoin's technical chart but the U.S. long-term bond yield.

He believes that recent policy responses indicate that the U.S. Treasury has become more sensitive to a rapid rise in long-term yields. If the 10-year yield approaches 5% and the 30-year yield once again challenges highs, the market will observe whether the Treasury continues to expand repurchases and whether the Fed introduces new liquidity tools.

If the repurchase scale continues to increase, the Fed balance sheet expands again, and the dollar continues to weaken, Hayes' liquidity trading framework will be strengthened. Bitcoin may then continue to be seen as a hedge against currency expansion and sovereign debt risk.

Conversely, if long-term yields fall on their own, repurchases are maintained at the liquidity management level, and the Fed does not expand its balance sheet, interpreting a $40 billion repurchase as a precursor to yield curve control could be an over-speculation.

Therefore, this interview truly discusses not whether Bitcoin will rise to $126,000 by the end of the year or $500,000. The core question raised by Hayes is: when the U.S. bond market once again approaches the policy pressure range, will the United States allow long-term rates to rise freely or will it use more liquidity to stabilize the market?

Bitcoin is currently trading the second leg up.

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