Hayes: Still in a bull cycle, Trump’s BTC will reach $1 million

Author: Arthur Hayes, founder of BitMEX; compiled by: 0xjs@Bitchain Vision

Keep—It—Simple—Stupid = KISS, simplicity is beauty.

Many readers forget the KISS principles when responding to the policies of the U.S. President Donald Trump administration.Trump’s media strategic goal is that every day you wake up, you’ll say to your friend, partner or inner self: “Oh my God, did you see what Trump/Elon/Robert Kennedy and others did yesterday? I can’t believe they did that.” Whether you’re emotional or frustrated, the melodrama of The Emperor is fun.

For investors, this continuous state of excitement is not conducive to accumulating funds.One day, you buy and sell quickly after digesting the next news headline.The market hits you in the process and your funds drop rapidly.

Remember the KISS principle.

Who is Trump?Trump is a performer in the real estate industry.To be successful in the real estate industry, you must master the skills to borrow huge amounts of money at the lowest interest rate possible.Then, in order to sell your home or rent out space, you have to brag about how impressive a new building or development will be.I am not interested in Trump’s ability to arouse sympathy in the global society, butInterested in his ability to fund his policy goals.

I believe Trump wants to finance his “America First” policy by borrowing money.If not, he would let the market naturally eliminate the credit embedded in the system and trigger a more severe recession than the 1930s.Would Trump want to be called Herbert Hoover or Franklin Delano Roosevelt (FDR) of the 21st Century?American history devalues ​​Hoover because historians believe that he did not print money quickly enough and worships Roosevelt because his New Deal policy was paid by printing money.I believe Trump wants to be considered the greatest president of all time, so he doesn’t want to destroy the empire’s structure with austerity.

To deepen this, remember what Hoover’s U.S. Treasury Secretary Andrew Mellon said in his handling of the overly leveraged U.S. and global economy after the stock market crash:

“Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate. It will clear away corruption in the system. High cost of living and high quality of life will decline. People will work harder and live a more moral life. Values ​​will adjust, and enterprising people will clean up the endgame left by those with poor abilities.”

Current U.S. Treasury Secretary Scott Bessent wouldn’t be so irritable.

If my point is correct, that Trump will achieve “U.S. first” through debt financing, how will this affect my view on the future of global risk asset markets (especially cryptocurrencies)?To answer this question, I have to form a perspective on the way Trump may increase the amount of money/credit (i.e. printing money) and lower its price (i.e. interest rates).So I have to have an idea of ​​how the relationship between the U.S. Treasury led by Scott Bessent and the Federal Reserve led by Jerome Powell will develop.

KISS

Who are Becente and Powell serving?Is it the same person?

Becente was appointed by Trump 2.0. Judging from his past and present interviews, his worldview is very consistent with Trump.

Powell was appointed by Trump 1.0, but he is a traitor.He defected to Obama and Clinton’s side.Powell implemented a massive 0.5% rate cut in September 2024, ruining his only remaining credibility.At that time, the U.S. economy was growing at a higher rate than the trend, and the embers of inflation were still there, and there was no need to cut interest rates.But Obama Clinton’s puppet Harris needs a boost, and Powell fulfilled his duties and cut interest rates.The result was not as expected, but Powell announced after Trump’s victory that he would complete his term and once again firmly fight inflation.

Something happens when you are in debt.First, interest payments will consume a large portion of your free cash flow.Secondly, because of the high level of debt, no one will lend you money, so you can’t fund additional asset purchases.So you have to restructure your debt, which requires extension of the period and lower coupon rates.This is a soft default because mathematically, doing both things at the same time reduces the present value of the debt burden.Once your actual debt burden is reduced, you can borrow again at affordable interest rates.From these perspectives, both the Treasury Department and the Federal Reserve play a role in restoring U.S. financial health.The success of this effort was hampered as Becente and Powell served different masters.

Debt restructuring

Becent has publicly stated that the current debt situation in the United States must change.He hopes to eventually extend the average maturity of the debt burden, which Wall Street calls “debt maturity.”Many macro experts have made suggestions on achieving this goal;The GenieThis solution is discussed in detail in this article.However, for investors, the bottom line is that the United States will softly default on its debt burden by reducing its net present value.

Given the global distribution of U.S. debt holders, it will take time to achieve this restructuring.This is a geopolitical problem.So in the short term (I mean the next three to six months), we cryptocurrency inventors don’t have to worry.

New loan

Powell and the Fed have extensive control over the amount of credit and its price.The Fed is legally allowed to print money to buy debt securities, which will increase the amount of currency/credit, that is, print money.The Fed also sets short-term interest rates.Given that the United States cannot default in nominal US dollar, the Federal Reserve decides the US dollar’s risk-free interest rate, namely the effective federal funds rate (EFFR).The Fed has four main leverages to manipulate short-term interest rates: Reverse Buyback Program (RRP), Reserve Balance Interest (IORB), Federal Fund Lower Limit and Federal Fund Higher Limit.IWe don’t need to go deep into the money market, we just need to understand that Powell can unilaterally increase the quantity of the US dollar and lower its price.

If Becente and Powell are co-conspirators, it will be very easy to analyze the future trends of dollar liquidity and China, Japan and the EU’s response to U.S. monetary policy.Given that they are obviously not accomplices, I wonder how Trump can manipulate Powell to print money and lower interest rates while still allowing Powell to comply with the Fed’s anti-inflation duties.

Suppress the economy

Fed’s recession law: If the U.S. economy falls into recession or the Fed is worried that the U.S. economy will fall into recession, it will cut interest rates or print money.

Let us use recent economic history to test this law.Thanks to Bianco Research for this excellent form.

This is a list of direct causes of the U.S. economic recession after World War II.The definition of a recession is that quarterly GDP growth is negative.I will pay special attention to what happened in the 1980s to the present.

Here is a chart of the lower limit of federal funds rate.Each red arrow represents the beginning of a loose cycle that occurs simultaneously with the recession.As you can see, it’s clear that the Fed will at least cut interest rates during the recession.

Fundamentally, peace under the United States and the global economy it ruled are financed by debt.Large companies finance future production and current operations expansion by issuing debt.If cash flow growth slows down significantly or drops directly, the final repayment of debt will be questioned.This is problematic because the liabilities of a business are largely the assets of the bank.Bank-holding corporate debt assets support their client deposit liabilities.In short, if the debt cannot be repaid, the “value” of all existing statutory credit bank notes will be questioned.

In addition, in the United States, most households are heavily in debt.Their consumption model is marginally paid for mortgages, auto loans and personal loans.If their cash flow generation capacity slows or drops, they will be unable to meet their debt obligations.Similarly, the banking system holds the above debts and supports its deposit liabilities.

The Fed must avoid a significant increase in the probability of large-scale defaults or business and/or household debt defaults during a recession or before cash flows slow or contract.This can lead to corporate and consumer debt defaults, which can lead to systemic financial difficulties.In order to protect the solvency of the debt financing economic system, the Federal Reserve will actively or passively cut interest rates and print money every time an economic recession occurs or the risk of an economic recession is intensified.

KISS

Trump manipulated Powell to alleviate financial conditions by triggering a recession or convincing the market that it was about to come.

To avoid the financial crisis, Powell will take some or all of the following measures: cut interest rates, end quantitative tightening (QT), restart quantitative easing (QE), and/or suspend the supplementary leverage ratio of banks to purchase U.S. Treasury bonds.

DOGE

How did Trump unilaterally cause the economic recession?

The marginal driving force of exceptionalism in the United States economic growth has always been the government itself.Whether the expenditure is fraudulent or necessary, government spending creates economic activity.In addition, government spending has a currency multiplier.That’s why the Washington, D.C. metropolitan area is one of the richest regions in the United States, as there are a large number of professional vampires who squeeze blood from the government.It is difficult to directly estimate the exact currency multiplier, but conceptually it is easy to understand that government spending has subsequent effects.

Confusing:

• The median household income in Washington, D.C. is $122,246, which is much higher than the national median.

• This makes Washington, D.C. the 96th-ranked city in the U.S. household income.

As a former president, Trump is well aware of the extent of fraud, fraud and waste within the administration.The two-party establishment has no intention of curbing this phenomenon because everyone benefits from it.Given that the Trump faction belongs to neither the Democratic Party nor the Republican Party, they do not hesitate to expose the drawbacks of the government’s spending plan.The establishment of an advisory committee supported by Trump’s stamp, called the Department of Government Efficiency (DOGE), led by Elon Musk, is a central move to rapidly and dramatically reduce government spending.

How does DOGE do this when many of the largest spending items are non-discretionary?If the payment is fraudulent, it can be stopped.If computers can replace government employees who manage these projects, the cost of human resources will drop sharply.Then the question becomes, how much fraud and inefficiency is there in government spending every year?If DOGE and Trump are credible, then the amount is as high as trillions of dollars per year.

One potentially outrageous example is who the Social Security Agency (SSA) sends checks to.If we believe DOGE’s claim, the department is distributing nearly a trillion dollars to deceased individuals and those whose identities have not been properly verified.I don’t know the truth of this statement.But imagine you’re a Social Security Department welfare fraudster and knowing that Elon and “big guys” dig deep into the data to report to the Justice Department the fraudulent payments you’ve received over the years.Will you continue your plot or run away?The key is that fraudulent activity may be reduced due to the threat of being discovered.As they said in China, kill the chicken to warn the monkey.So while mainstream media has hyped Elon and DOGE, I’m sure if it’s not a trillion dollars, it’s a few hundred billion dollars.

Let’s take a look at the human resources aspect in the government expenditure equation.Trump and DOGE are firing hundreds of thousands of government employees.Whether the unions are strong enough to launch legal challenges to the mass elimination of “useless” government workers remains to be determined.But the consequences have already emerged.

The biggest risk is that the layoffs we are currently seeing are just the tip of the iceberg.The scale and timing of future layoffs will determine whether the labor market can keep running properly,” DeAntonio explained. “We currently expect the federal workforce to drop by about 400,000 throughout 2025 due to ongoing recruitment freezes, delayed resignations and DOGE-initiated layoffs.–Fox Business

Although Trump’s 2.0 presidency has just passed over a month, the impact of DOGE is obvious.Unemployment benefits applications surge in Washington, D.C.House prices are falling.Consumer discretionary spending, which may be driven by mass fraud and fraud by the U.S. government, disappoints financial analysts’ predictions.The market started talking about the word “R” (Recession).

According to a new analysis by real estate trading platform Parcl Labs, Washington, D.C. house prices have fallen 11% since the beginning of the year, tracking the impact of the U.S. Department of Government Efficiency (DOGE) action on the city’s real estate market.– Newsweek

Rostan said in a Bluesky article that the U.S. will almost certainly go toward a severe economic contract due to massive layoffs in government departments and abrupt cancellation of federal contracts.– Economic Times

R represents economic recession and is the red word of the economy.Powell didn’t want to be the modern version of trans Hester Plin, so he had to respond.

Powell changes his position again

Powell has changed his policy stance several times since 2018 and he has certainly been affected.The question for investors is whether Powell takes the initiative to save the financial system from collapse or acts passively after large financial institutions go bankrupt.Powell chose the path for purely political purposes.Therefore, I can’t predict it.

All I know is that $2.08 trillion in U.S. corporate debt and $10 trillion in U.S. Treasury bonds must be extended this year.If the United States is on the brink or medium term of a recession, the shock from cash flow will make it nearly impossible to roll out these huge notes at current interest rate levels.therefore,To safeguard the sanctity of the financial system under the U.S. rule, the Federal Reserve must and will take action.

For us cryptocurrency investors, the problem is the speed and scale of credit outflows in the United States.Let’s analyze what major measures the Fed will take to turn the situation around.

Reduce interest rates

It is estimated that every 0.25% reduction in federal funds rate is equivalent to $100 billion in quantitative easing or printing of money.Suppose the Fed lowers interest rates from 4.25% to 0%.This is equivalent to $1.7 trillion in quantitative easing.Powell may not lower interest rates to 0%, but you can bet that Trump will allow Elon to continue cutting spending until Powell lowers interest rates to ideal levels.Trump controls his aggressiveness when interest rates reach acceptable levels.

Stop quantization tightening

The Fed’s recent January 2025 minutes details that some board members believe that quantitative austerity must end sometime in 2025.Quantitative tightening is the process by which the Federal Reserve reduces the balance sheet size, thereby reducing the amount of US dollar credit.The Fed conducts $60 billion in quantitative austerity policies every month.Assuming the Fed starts action in April, this means that relative to previous expectations,The end of quantitative austerity policy in 2025 will inject $540 billion in liquidity.

Restart quantitative easing/SLR exemption

In order to absorb US Treasury bond supply, the Federal Reserve can restart quantitative easing and grant banks a exemption of SLR (Supplementary Leverage ratio).Using quantitative easing, the Fed can print money and buy Treasury bonds, thereby increasing credit volume.The SLR exemption allows U.S. commercial banks to purchase Treasury bonds using unlimited leverage, thereby increasing credit volume.The key is that both the Federal Reserve and commercial banking systems are allowed to create currency out of thin air.Restarting quantitative easing and giving SLR exemptions are decisions that only the Federal Reserve has the right to make.

If the federal deficit remains within the range of $1 to $2 trillion per year, and the Fed or the bank absorbs half of the new supply,This means that the money supply will increase by 500 billion to 1 trillion US dollars each year.50% is conservative because the Fed purchased 40% of new issuances during COVID-19.Still, by 2025, large exporters (China) or oil producers (Saudi Arabia) have stopped or significantly slowed down the pace of buying U.S. Treasury bonds using their dollar surplus; therefore, the Fed and banks can do more manipulation.

FED printing mathematics total

Rate cut: $1.7 trillion

+

Stop QT: $0.54 trillion

+

Restart quantitative easing/SLR waivers: $0.50 trillion to $1 trillion

=

Total = US$2.74 trillion to US$3.24 trillion

COVID and DOGE printing

In the U.S. alone, the Federal Reserve and the Treasury Department created about $4 trillion in credit between 2020 and 2022 to cope with the coronavirus pandemic.

DOGE-inspired money printing may reach 70% to 80% of COVID levels.

Bitcoin rose about 24 times from its 2020 low to its 2021 high just because the United States issued $4 trillion in banknotes.Given that Bitcoin’s market value is much larger now than it was then, we are a little more conservative.Bitcoin may rise 10 times as the United States issues $3.24 trillion in banknotes.For those who ask how Bitcoin reaches $1 million during Trump’s presidency, this is how to achieve it.

What must be true

Although the market is currently in a downturn, I paint a very optimistic picture of the future for Bitcoin.Let’s look at my assumptions so that readers can judge for themselves whether they are justified.

• Trump will provide financing for “America First” through debt.

• Trump is using DOGE to clear political opponents who are addicted to fraudulent income streams, cut government spending, and increase the likelihood of a slowdown in U.S. government spending leads to a recession.

• The Fed will adopt a series of policies before or after the recession to increase the amount of currency and lower the price of currency.

Considering your worldview, it’s up to you to judge whether this makes sense.

US Strategic Reserves

I woke up Monday morning and found Trump hype.On Truth Social, Trump reiterated that the United States will build a strategic reserve of bitcoin and a bunch of junk coins.The market has risen sharply due to these “news”.This is nothing new, but the market sees Trump’s intention to reaffirm the crypto policy as an excuse for a fierce dead cat rebound.

If such reserves are to have a positive impact on prices, the U.S. government must have the ability to actually buy these cryptocurrencies.There are no secrets of idle dollars waiting for deployment.Trump needs help from Republican lawmakers to raise debt ceilings and/or revaluate gold to match current market prices.These are the only two ways to fund crypto strategic reserves.I’m not saying Trump won’t keep his promise, but it may take longer to start buying than leveraged traders can hold on before liquidation.So, let’s downplay this rebound.

Trading strategy

Bitcoin and the broader cryptocurrency market are the only real global free markets that exist now.The price of Bitcoin tells the world in real time what the global society thinks about the current fiat currency liquidity situation.

On the eve of Trump’s coronation in mid-January 2025, Bitcoin hit a high of $110,000 and fell to a local low of $78,000, a drop of about 30%.Although the U.S. stock market index is still close to its all-time high,Bitcoin is crying out that liquidity crisis is coming.I believe in the signal from Bitcoin, so a serious adjustment in the U.S. stock market is coming, driven by recession concerns.

If Bitcoin leads the market in the downside, it will also lead in the upside.Given that slight financial turmoil quickly evolves into a full panic due to the massive leverage embedded in the system, if my predictions are generally correct, we don’t have to wait for the Fed to take action too long.As the dirty fiat financial system led by the U.S. stock market catches up and starts printing money,Bitcoin will first bottom out and then start to rise.

I firmly believe we are still in a bull cycle, so the worst bottom will be the all-time high of $70,000 in the previous cycle.I’m not sure if we’ll fall that low.A positive dollar liquidity signal is that the U.S. Treasury General Account is Declining, this plays a role in liquidity injection.

Given that I am very confident about Trump’s type of financier and its ultimate goal,Maelstrom will increase positions between $80,000 and $90,000 in Bitcoin trading.If this is really a dead cat rebound,I expect to add positions again when Bitcoin is below $80,000.

If the S&P 500 and Nasdaq 100 are down 20% to 30% from all-time highs, coupled with a large financial institution on the verge of bankruptcy, we might experience global relevance at some point.This means that all risky assets will be hit hard.Bitcoin may fall below $80,000 again, or even to $70,000.Whatever happens, we will be cautious in buying on dips without using leverage to cope with the ultimate turbulence in dirty fiat financial markets, and then the global economy led by the United States can expand again, pushing Bitcoin to $1 million or more.

Be careful of China.China hopes to keep the RMB exchange rate stable against the US dollar, for better or worse.If the supply of the US dollar increases, he can instruct the People’s Bank of China to increase the supply of the RMB to ensure that the dollar-to-yuan exchange rate remains stable.

KISS.

Let politicians do politicians’ things, go their own way, and buy bitcoin.