Bearish Signals from Arthur Hayes in His Latest Essay The Ugly

As the first part of a trilogy, The Ugly will be followed by essays titled The Good and The Bad, inspired by the classic film The Good, the Bad, and the Ugly. These pieces will explore the impact of meme coins and the regulatory risks facing the U.S. market.

Hayes draws a vivid analogy between the market and the risk of an avalanche during skiing: the surface may seem stable, but danger is quietly accumulating beneath. He admits that his optimism from earlier in the year has been replaced with concerns about declining global liquidity, rising yields on 10-year U.S. Treasuries, and increasing financial market volatility.

In Hayes’ projection, Bitcoin could experience a steep 30% correction, dropping to $70,000–$75,000, before eventually climbing to $250,000 by the end of the year. He emphasizes that this kind of correction could be particularly severe, given the current high levels of investor optimism.

According to the BitMEX co-founder, the release of the $TRUMP meme token and the Trump administration’s political strategies might lend some strength to the cryptocurrency sector. Yet, he cautions that the ongoing slowdown in liquidity creation across the U.S., China, and Japan poses persistent challenges for the market.

He speculates that the Trump administration could drive another round of U.S. dollar printing, though this would probably require a “small-scale financial crisis” to prompt the Federal Reserve to intervene in support of the markets.

Arthur Hayes revealed that Maelstrom, his investment fund, has reduced its crypto holdings, reallocating part of its capital to USDe. He explained the move as a proactive measure to take advantage of lower prices in the event of a market correction. Hayes added that he is ready to jump back into active trading should Bitcoin surpass $110,000 with significant trading volume.

To wrap up, Hayes warned that the ongoing instability might only be the start of more substantial market changes. He encouraged investors to keep a close eye on macroeconomic signals and brace themselves for sharp market swings.