Arthur Hayes warns of a major crypto correction after the March 2025 peak

Former BitMEX CEO Arthur Hayes shared his bold predictions for the cryptocurrency market, noting that it will likely peak by mid-March 2025, before seeing a sharp correction. Hayes explained his reasoning, writing: “My forecast is that the market peaks in mid-to-late March, so this equates to $180 billion worth of liquidity removed due to QT from January to March.”

Liquidity factor

Hayes points to quantitative tightening by the Federal Reserve (QT) policy, which involves reducing the size of its balance sheet by $60 billion per month. This tightening has removed significant liquidity from financial markets. Hayes predicts that by mid-March 2025, this policy will have drained $180 billion from the market, contributing to the peak of the cryptocurrency market.

The contraction in 2022, according to Hayes, was the result of similar liquidity issues. When US Treasury Secretary Janet Yellen issued shorter-term coupon bonds instead of longer-term bonds, she drained more than $2 trillion of the Federal Reserve’s reverse repo facility. Low liquidity led to declines in both cryptocurrency and stock markets, particularly affecting large US technology stocks.

Short-term bullish signal for Bitcoin

Despite the general market correction expected in the second quarter of 2025, Hayes believes there is a short-term bullish signal for Bitcoin. He explained that the US Treasury would spend its general account (TGA) with the Federal Reserve, which would pump liquidity into the market, which would benefit the price of Bitcoin in the short term. Hayes also expects the reverse repo facility (RRP) to see its balance fall from $1.237 trillion to zero by the end of the first quarter of 2025, further enhancing liquidity.

This increase in liquidity will likely come from money market funds (MMFs) withdrawing money from the bailout to buy higher-yielding Treasury bills. This could add up to $237 billion to the market during the first quarter of 2025, which Hayes believes will fuel the eventual rally of the cryptocurrency market.

Potential challenges ahead

However, Hayes also expects a downside factor that may impact the market in April: tax deadlines. Since April is a major tax month in the US, Hayes warns that these deadlines could pose a challenge for the cryptocurrency market, which could contribute to a sharp correction after the March peak.