Arthur Hayes: Hidden Liquidity and the 2026 Market Script

Key Takeaways

• Hidden liquidity no longer enters markets through clear announcements. Policy support now moves quietly through technical tools, and price reacts before narratives catch up.
  Reserve Management Purchases function like QE under a different name. The mechanism changes, but the effect on liquidity remains familiar.
• Political incentives prioritize rising asset prices. Equity markets and the AI trade stay supported because they anchor confidence and growth narratives.
• Bitcoin responds early to shifts in dollar liquidity. Price often moves while skepticism still dominates discussion.
• Altcoin leadership rotates into new, uncomfortable areas. Waiting for familiar patterns usually means missing the strongest moves.
• Successful positioning requires adapting mental frameworks. Comfort, nostalgia, and consensus arrive only after opportunity fades.

Introduction

Markets are still frozen, waiting for the Fed to say the magic words “quantitative easing,” as if the moment QE is announced, portfolios will explode overnight. That headline is never coming. Not in this cycle. The rules have changed, and anyone waiting for a clear signal like previous years is already behind. Liquidity no longer arrives through press conferences. It moves quietly, disguised in new language, and misunderstood by those watching the wrong indicators.

Arthur Hayes, co-founder of BitMEX and former trader at Citigroup and Deutsche Bank, made this clear in his latest podcast with Kyle Crypto Hunt. His message is blunt and the announcement everyone is waiting for will never appear.

According to Hayes, the script for 2025 and 2026 is already written, and most of it has already played out. What comes next will not reward headline readers. It will reward those who understand how power, liquidity, and incentives actually move the system.

Part 1. Bank of Japan and early volatility

Kyle Chasse: Recently, markets have focused on Bank of Japan policy. Do you expect a rate hike, and how should people think about market impact?

Arthur Hayes: After comments from Governor Kazuo Ueda a few weeks ago, discussion around a hike stopped feeling hypothetical. You could watch pricing shift almost immediately as traders started adjusting expectations.

From conversations with people who follow BOJ policy closely, USD JPY between 155 and 160 represents a level authorities refuse to tolerate. Once yen weakens into that range, pressure builds very quickly. You can imagine policymakers watching currency weakness compound day after day, knowing credibility erodes with every move higher. At that point, hesitation disappears and action becomes unavoidable, either through a rate increase or direct FX intervention.

Even if a hike happens, scale remains limited, moving from 0.25% to 0.5%. With inflation near 3%, macro impact stays small. You might see a few volatile sessions and some short term tightening, but nothing close to a structural shift in global capital movement.

When you zoom out, Japan still operates under one of the loosest monetary setups among developed economies. Real rates remain deeply negative even after a hike, and once you focus on that reality, short term headlines lose most relevance.

Part 2. Fed Chair succession misses the point

Kyle Chasse: Many people focus on who replaces the Fed Chair. Would someone like Kevin Warsh change market direction?

Arthur Hayes: History keeps delivering the same lesson. A US president eventually gets monetary policy aligned with political goals.

Looking back across decades, tension between White House and Fed leadership never disappeared. Lyndon Johnson physically pressured William Martin to force rate cuts. Richard Nixon leaned hard on Arthur Burns ahead of reelection. When you remember those episodes, criticism aimed at Jerome Powell feels mild by comparison.

Personal views held before taking office rarely survive long. Once seated, priorities shift fast. You start to realize career survival inside the system depends on alignment with executive power rather than resistance.

Trump wants lower rates, broader liquidity, rising asset prices, while rejecting responsibility for inflation. Anyone sitting in the chair will feel pressure immediately. From a market perspective, names rotate while outcomes stay consistent.

Part 3. Why the AI trade still matters

Kyle Chasse: How do you think about liquidity expansion while inflation risk remains present?

Arthur Hayes: Modern US economy runs on financial assets. Equity markets do not simply reflect economic health. They actively create it. Once you accept that structure, incentives become obvious.

When the S&P 500 rises, households feel wealthier. Spending increases. Confidence improves. Corporate leaders invest and hire. Political leadership relies heavily on that feedback loop, especially during election cycles.

Because of those incentives, equity support becomes mandatory. AI expansion plays a central role inside that framework. Arguments about bubble collapse miss the political reality driving continued support.

There could be political fallout if flagship AI stocks were to collapse. Source: CNBC

Shorting Nasdaq or Nvidia under these conditions carries serious risk. You can imagine political fallout if flagship AI stocks collapse after leadership tied economic credibility to technological dominance. Momentum remains necessary regardless of valuation debates.

Trump linked economic messaging directly to AI success. Debt growth, cheaper capital, and money supply expansion become required inputs. Inflation complicates messaging, but language solves that problem. Policy continues while labels change.

Part 4. RMP and monetary camouflage

Kyle Chasse: Easing always returns under new names. What label applies now?

Arthur Hayes: Reserve Management Purchases, shortened to RMP.

The term appeared after the December tenth Fed meeting. Once you look past wording, function becomes familiar. Mechanics closely resemble earlier QE cycles, even if terminology suggests otherwise.

I spoke with macro researchers and bond traders. Technical definitions usually block the QE label, yet market impact tells a different story. Effects matter more than vocabulary.

Fed now buys short maturity Treasury bills instead of long duration bonds. Many analysts focus on duration sensitivity and conclude impact remains limited. That view misses the transmission channel.

Money market funds hold roughly 40% of outstanding T bills. Banks hold far less. When Fed buys those bills, cash gets released into money markets and flows into repo channels.

Through repo, leverage funds finance longer dated bond purchases, while capital ultimately ends inside Treasury accounts before government spending begins. Deficits receive funding without dramatic announcements. Printing continues, routed through quieter plumbing.

Part 5. When recognition arrives

Kyle Chasse: When does broader market recognition happen?

Arthur Hayes: Through late 2024, Bitcoin likely remains between $80,000 and $100,000 while skepticism dominates. Many participants still treat RMP as technical plumbing rather than a liquidity engine.

Early 2025 changes perception. Liquidity effects become visible across asset prices, and momentum starts shifting. March represents peak optimism, where expectations accelerate quickly. Bitcoin could reclaim $124,000 and move toward $200,000.

Later, concern around program duration triggers pullbacks. Panic feels possible, yet structure stays healthier. Higher lows form. Once continuation becomes obvious, trend resumes.

By late 2026, a $250,000 target sits well within reach under that framework.

Part 6. Personal positioning

Kyle Chasse: How are you positioned personally?

Arthur Hayes: Roughly 90% deployed. Cash remains available for volatility. No leverage involved, so short term swings matter less.

Attention now shifts toward dominant altcoin themes. You can already see early separation. Best performance outside Bitcoin came from Ethena.

ENA functions as interest rate exposure. Falling rates drive leverage demand. Basis yields widen. USDe supply expands. Protocol revenue supports buybacks.

Short term withdrawals do not change structure. A reversal similar to late 2024 remains likely.

Part 7. Privacy and incentive structures

Kyle Chasse: Public blockchains expose activity. Should people worry?

Arthur Hayes: Visibility only exists where disclosure allows. Wallet trackers capture fragments rather than full reality.

Privacy value grows from surveillance anxiety. Once people start questioning who watches transactions and how data gets used, demand appears naturally. Scarcity accelerates desire.

Governments avoid outright bans and restrict access through intermediaries instead. Difficulty increases appeal. Zcash fits that pattern well.

Part 8. Lessons from 2024

Kyle Chasse: Key lesson from recent trades?

Arthur Hayes: Most positions lost money. Profits came from a small group like HYPE and ENA.

The lesson stays simple. Ignore noise. Focus capital on moves large enough to matter.

Part 9. Altcoin cycles in reality

Kyle Chasse: Another altcoin cycle ahead?

Arthur Hayes: Altcoin cycles never disappear. Fear blocks participation.

Strong performers always look uncomfortable early. Hesitation stops most people. Without mental adjustment, cycles pass unnoticed.

Part 10. Risk of being wrong

Kyle Chasse: What could invalidate your outlook?

Arthur Hayes: Market perception could shift. Liquidity interpretation might fail.

Capital already reflects conviction. Outcome belongs to market judgment.

Part 11. Rapid fire

Kyle Chasse: Bitcoin late 2026?

Arthur Hayes: Higher. $250,000 remains target.

Kyle Chasse: Popular losing trade?

Arthur Hayes: Nvidia shorts.

Kyle Chasse: Most underestimated risk?

Arthur Hayes: Leverage.

Kyle Chasse: Final thought?

Arthur Hayes: If you want to see what others miss, imagination matters more than consensus.

Conclusion: Key Takeaways

This conversation points to a market environment many people are still struggling to accept. Liquidity no longer arrives with announcements or clear signals. It flows quietly, shaped by political pressure and hidden behind technical terms. RMP serves the same purpose QE once did, only without triggering public backlash. While debate continues, capital moves ahead, and price responds long before consensus forms.

For investors, the takeaway is practical rather than dramatic. Each cycle reshapes behavior, not outcomes. AI stays in focus because leadership depends on rising markets. Bitcoin reacts early as liquidity conditions improve. New altcoin themes emerge in places most participants hesitate to explore. Progress comes from updating assumptions, staying flexible, and acting without waiting for comfort. Once clarity feels universal, opportunity has already passed.

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