Arthur Hayes Expects Bitcoin Weakness Until Fed And Banks Start Growing Balance Sheets

• Arthur Hayes said dollar liquidity was “recharging” and shared a chart of the USDLIQ U Index, which has slipped from its recent high.
• The Fed’s total assets fell to about $6.746 trillion in late October from about $6.756 trillion in mid-October.
• Reserve balances averaged roughly $2.89 trillion in the week to Oct. 28, down about $68.8 billion.

FLOP Labs CEO Arthur Hayes said on Tuesday that he now expects Bitcoin (BTC) to stay weak until the Federal Reserve or banks start expanding their balance sheets.

On X, Hayes said, “USD liquidity is recharging. Expect $BTC weakness until Fed and/or banks start growing their balance sheet.” Hayes also shared a chart of a dollar liquidity gauge. USDLIQ U, index, which had slipped from its recent high. 

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He tied Bitcoin’s next move to how much money is flowing through the financial system. When the Fed or banks expand their balance sheets, more cash typically becomes available for investors to invest in risk assets. 

Fed Balance Sheet Edges Lower

For now, the Fed’s balance sheet has been moving the other way. Total assets stood at over $6.746 trillion on Oct. 28, according to the central bank’s weekly H.4.1 release. Fed data showed that it was down from about $6.756 trillion on Oct. 14. Reserve balances dropped by about $68.8 billion in the week to Oct. 28, to roughly $2.89 trillion.

That came as the Treasury’s cash account at the Fed rose by about $70.5 billion to roughly $1.02 trillion over the same week. 

In August, Treasury Secretary Scott Bessent's department raised the maximum size of its bond buyback operations to at least $4 billion from $2 billion. Bitcoin had risen nearly 5% to above $67,000 the day of the announcement. Hayes urged investors at the time to “back up the truck and buy crypto with both hands.” Within a week, Bitcoin touched $80,000.

What Comes Next

Traders watching for the shift that Hayes described will get the next look at the Fed's balance sheet on Nov. 5, when the H.4.1 report is scheduled for release. The October jobs report will follow the next day. 

At the time of writing, Bitcoin’s price was trading at $77,300, down over 1% in the past 24 hours. On Stocktwits, retail sentiment around BTC remained in the ‘extremely bearish’ zone, while chatter around it stayed at ‘normal’ levels over the past day.

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