From theblock by Danny Park

Former BitMEX CEO Arthur Hayes advised risk-takers at his current family office Maelstrom to turn their risk dial to “degen,” as he predicted the “Trump pump” crypto bull cycle will continue until mid to late March.

In his new essay, Hayes backtracked on his previous prediction from December that the market will see a “harrowing dump” around Donald Trump’s inauguration as investors realize their hopes of a pro-crypto policy makeover are unrealistic.

The Maelstrom chief investment officer and crypto billionaire stated in his latest argument that sufficient dollar liquidity can cover the risks of potential policy letdowns from Donald Trump’s incoming administration. “I still believe that is a potential negative factor that could weigh upon the market in the short term, but against that, I must balance the dollar liquidity impulse,” Hayes wrote. “Bitcoin, for now, jukes and jives as the pace of dollar emissions changes.”

Positive dollar liquidity

Hayes explained that he expects to see $237 billion worth of liquidity in the first quarter of this year from the declining Reverse Repo Facility, where financial institutions park excess cash at the Federal Reserve. Hayes said RRP is expected to near zero within the first quarter.

While the Fed continues its quantitative tightening — a negative factor for dollar liquidity — Hayes said that the central bank reduced the interest rate it pays on RRPs. As RRP becomes a less attractive option for deposits, institutions may inject their liquidity into the market. He added that the U.S. Treasury, on the other hand, is facing a debt ceiling that will force it to spend down the Treasury general account, which is also expected to send liquidity into the economy.

Hayes further wrote that he is confident of the math behind the positive dollar liquidity from the Fed and Treasury, which he predicts will total $612 billion by the end of the first quarter.

Around March, Hayes said TGA will get closer to being emptied, which will be followed by negative dollar liquidity factors such as raising the debt ceiling and the April 15 tax payment deadline.

According to Hayes, the caveats to this scenario are the Trump administration’s ability to quickly cut down government spending and passing bills into laws, and global factors such as the Bank of Japan’s policy rates.

Given the circumstances, the Maelstrom CIO said the family office would increase investments into decentralized science tokens, and stated that it has purchased BIO, VITA, ATH, GROW, PSY, CRYO and NEURON. DeSci is a movement to use blockchain and crypto to facilitate various aspects of scientific research.

“Of course, anything can happen, but on balance I am bullish,” Hayes said.