Former BitMEX CEO Arthur Hayes has predicted a potential Bitcoin (CRYPTO: BTC) price peak in late March 2025, driven by a surge in dollar liquidity.

Liquidity Flowing Into The System Is Bullish

In his latest blog post from Jan. 7, Hayes argues that a complex interplay of U.S. Federal Reserve policy and Treasury actions will create a favorable environment for crypto gains in the first quarter before facing a possible correction.

Hayes highlights the current liquidity injections stemming from the depletion of the Fed's Reverse Repo Facility (RRP) and the Treasury's General Account (TGA).

According to Hayes, the RRP, "fallen to almost zero," representing an injection of "$237 billion of dollar liquidity in the first quarter".

He explains that combined with other factors, this results in a "net injection of $57 billion in liquidity" even when factoring the Fed's quantitative tightening.

Hayes also notes that the Treasury will begin "extraordinary measures" to fund government expenditures due to the debt ceiling, which will initially lead to spending down its TGA account, creating further positive liquidity.

However, Hayes cautions that this positive environment might be temporary.

"The real question is the pace at which the RRP goes from ~$237 billion to zero," and while these funds are flowing into markets, the debt ceiling crisis could turn the tide: "Once default and shutdown are imminent, a last-minute deal will be reached, and the debt ceiling will be raised.

At that point, the Treasury will be free to borrow on a net basis again and must refill the TGA. This will be dollar liquidity negative."

Why The First Quarter Will Be 'Time To Sell'

In his analysis, Hayes also addresses the potential impact of Trump's policies, noting that "the sasa of a letdown by team Trump on his proposed pro-crypto and pro-business legislation can be covered by an extremely positive dollar liquidity environment."

However, Hayes remains cautiously optimistic about the first quarter of 2025 as he states that "it will be time to sell in the late stages of the first quarter and chill on the beach... and wait for positive fiat liquidity conditions to re-emerge in the third quarter."

Despite recognizing the inherent risks involved, Hayes expresses confidence in the liquidity factors: "I have confidence in the math behind how the RRP and TGA balances will change over time."