Arthur Hayes argues that the next phase of the crypto cycle will not be driven by the headline pivot to quantitative easing, but rather by a “stealth” version run through the Federal Reserve’s Standing Repo Facility (SRF). In a new essay titled “Hallelujah” published on November 4, 2025, the former BitMEX CEO lays out a balance sheet-driven case that persistent U.S. budget deficits, hedge fund demand for U.S. Treasuries financed through repos, and the Fed's need to limit funding stress will ultimately lead to increased dollar liquidity that “drives up the price of Bitcoin and other cryptocurrencies.” He explains the core mechanism: “Government-issued debt increases the money supply.”
Hayes' logical chain begins with an observation about political motives and fiscal calculations. He observes that governments can finance their spending with “savings or debt,” and that elected officials “will always prefer to borrow from the future in order to get reelected in the present.” For the United States, he argued, the trajectory is already set: “Here are the estimates from TBTF bankers and several U.S. government agencies. As you can see, this estimate is about a $2 trillion deficit financed by about $2 trillion in borrowing.” In his model, once we accept that “annual federal deficit = annual national debt issuance,” the next important question is who actually buys those bonds, and with what financing?
Fed’s stealth QE will “pump up crypto”
He has dismissed foreign central banks as reliable marginal buyers after the United States crippled Russia's reserves with sanctions in 2022. “If Pax Americana tries to steal Russian gold… foreign bondholders will never be safe,” it says, concluding that reserve managers “will buy gold rather than bonds.” He similarly downplays the capacity of the US household sector, given that “the personal savings rate was 4.6% in 2024” and that the “US federal deficit was 6% of GDP,” and argues that the fact that America's largest money center banks only increased their Treasury holdings by “~$300 billion” in 2025 compared to “$1.992 trillion” in issuance is meaningful but not conclusive.
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Instead, Hayes positions relative value hedge funds, particularly those that book positions through Cayman vehicles, as marginal pricing bids for U.S. duration. He cited a recent Federal Reserve study that said: “Cayman Islands hedge funds purchased a net $1.2 trillion in Treasury securities from January 2022 to December 2024… (and) absorbed 37% of the net issuance of notes and corporate bonds.” The transaction architecture is simple. It “purchases cash Treasury securities and sells corresponding Treasury bond futures contracts” and leverages its meager base through repo financing. Edge is “measured in basis points,” so trading only works when leverage is cheap and predictable on a daily basis.
That funnel leads directly to SRF. Mr. Hayes points to the Fed's short-term interest rate corridor (the “upper and lower federal funds, which currently equal 4.00% and 3.75%, respectively)” and the policy pipeline that keeps market rates within it: money market funds (MMFs) and reverse repo facilities (RRPs) at the lower end for banks, the reserve requirement rate (IORB) for banks in the middle, and the SRF at the upper end as an emergency faucet.
Federal Funds Floor = RRP
He said the cash supply to ease SOFR is structurally thinner than it was when the Fed began quantitative tightening in early 2022. Money market funds have been able to deplete their RRPs to zero, making them difficult to use as providers of repo cash because “T-bill interest rates are so attractive,” he said. This forces banks to provide liquidity as long as they have sufficient reserves, but “banks have lost trillions of dollars in reserves since the Fed began QT.”
Countering the decline in cash supply is persistent demand for repo financing from the RV Fund, which needs to take advantage of its “marginal” bond purchases. If SOFR threatens to go through the roof and repo reliability deteriorates, the Fed's SRF must backstop the system to prevent funding mishaps. “The Fed created the SRF because a similar situation occurred in 2019,” Hayes wrote. “The Fed can use the SRF printing presses to provide an unlimited supply of cash as long as it provides collateral in an acceptable form.” His conclusion is straightforward. “If the SRF balance is above zero, we know the Fed is using paper money to cash politicians' checks.”
Hayes calls this dynamic situation “stealth QE.” He argues that the idea of full balance sheet expansion through asset purchases is now politically toxic – “Quantitative easing is a dirty word…Quantitative easing = money printing = inflation” – so central banks would prefer to meet marginal dollar demand through SRF lending rather than creating visible excess reserves.
What this means for the crypto market
In his view, the results are functionally similar from a liquidity perspective. That is, repo credits distributed by the Fed against government bonds still increase the dollars available in the system to fund government borrowing. “This may buy some time, but ultimately the rapid expansion of government debt issuance will necessitate repeated use of the SRF,” he wrote. “Stealth quantitative easing will begin soon. We don’t know when it will begin. But…as the lender of last resort, the SRF balance must grow. As the SRF balance increases, the amount of fiat dollars around the world will expand as well. This phenomenon will reignite the Bitcoin bull market.”
He also outlines some short-term tactical background that helps explain the recent market tone across cryptocurrencies. He noted that while the auctions have been an influx of cash into the Treasury's general account, the government shutdown has temporarily hampered fiscal spending and caused a net outflow of private sector liquidity.
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“The Treasury Department’s general account is approximately $150 billion above its $850 billion target,” he wrote, and argued that this “excess liquidity will not be released to the market until the government reopens” contributing to the “current weakness in the crypto market.” In other words, the same fiscal engine that ultimately forces the Fed's hand through the SRF can drain liquidity in the very short term if issuance is front-loaded.
Hayes' rhetoric remains intentionally sharp. He describes U.S. Treasuries as “shitholes” at prevailing real yields, calls the buy-side “debt suckers,” and begins with a paean to the monetary nature of Bitcoin: “Praise be to Lord Satoshi that time and compound interest exist no matter who you are.” This provocation is spot on. If marginal financing of the US deficit becomes increasingly reliant on opaque backstops rather than transparent reserve creation, cryptocurrencies’ inherent non-sovereign liquidity cycles will crowd out the same hidden plumbing. He summarizes the results of investment in one sentence: “Treasury bond issue = increase in dollar supply.''
Essays are not calendar calls. Hayes declined to put a time stamp on the modulation, saying “we don't know when it will start,” but warned: “Between now and stealth quantitative easing, we have to manage our capital. We can expect markets to be volatile,” especially if the dynamics of the shutdown distort flows.
However, the direction is clear if SRF usage becomes established: “Stealth QE will soon begin… (and) the Bitcoin bull market will reignite.” For crypto investors accustomed to watching CPI results or FOMC results, the message is to track the microstructure of money markets instead. In Hayes' framework, when the SRF balance is no longer a rounding error and starts to return to trend, it indicates that dollar liquidity has quietly reversed and the cryptocurrency has not yet reached its all-time high.
At the time of writing, the market capitalization of cryptocurrencies was $3.41 trillion.
Featured image created with DALL.E, chart on TradingView.com
