Arthur Hayes claims that the recent drop in the price of Bitcoin has little to do with weakness in cryptocurrencies in particular, but rather a sharp contraction in dollar liquidity that is spreading across global markets.
Key points:
- Arthur Hayes associates Bitcoin’s decline with a $300 billion contraction in US dollar liquidity rather than crypto-specific factors.
- USDLIQ is down almost 7% in six months, reflecting tightening financial conditions.
- Hayes says the buildup of government funds and dwindling liquidity is putting pressure on Bitcoin and other risky assets.
In an article on the website
Hayes noted that the U.S. government could replenish its cash reserves to fund spending in the event of a potential shutdown, thereby removing liquidity from the financial system.
The dollar liquidity index fell by 7%, which had a negative impact on Bitcoin.
The contraction is visible in the USDLIQ index, which tracks general dollar liquidity conditions.
The index has fallen about 7% over the past six months, from a peak near 11.8 million in August to about 10.88 million at the end of January, according to market data presented in Hayes’ message.
Hayes argued that Bitcoin’s price weakness over the same period should not be surprising.
“The decline in the value of Bitcoin is not surprising given the declining liquidity of the dollar,” Hayes wrote, linking the move directly to macroeconomic forces rather than changes in sentiment within the cryptocurrency market itself.
A drop of around $300 billion in the liq dollar in recent weeks, mainly driven by a $200 billion rise in the TGA, means the government could increase cash balances to fund spending in the event of a shutdown. $BTC This is not a surprise given the decline in dollar liquidity. pic.twitter.com/ctPjWd8188
-Arthur Hayes (@CryptoHayes) January 30, 2026
Liquidity conditions have been a key factor for Bitcoin and other risk assets, with periods of increased dollar supply often coinciding with strong rallies.
Conversely, when liquidity is absorbed into public accounts or under tighter financial conditions, speculative assets tend to suffer as leverage falls and risk appetite fades.
Hayes’ comments come as bitcoin has failed to regain momentum after recent declines, even as some investors look for catalysts such as interest rate cuts or renewed flows into spot ETFs.
Instead, the focus is now on macroeconomic processes, including Treasury cash management and greater availability of the dollar, as a short-term constraint.
Bitcoin Price Falls as Federal Reserve Warns and Geopolitics Influences Risk Appetite
Bitcoin price fell below $89,000 after a short-lived rebound, affected by tightening financial conditions and rising geopolitical tensions that negatively affected risk assets.
According to analyst Samer Hassan of XS.com, the Federal Reserve’s still somewhat neutral stance, along with tensions in the Middle East, have reduced demand for speculative investments in cryptocurrency markets.
Market data indicates a decline in trader confidence. Figures from CoinGlass show a 42% drop in open trading volume for cryptocurrency futures from record levels, with breakout attempts quickly undone by heavy selling.
Meanwhile, capital has shifted to traditional safe havens such as gold and silver, leaving digital assets struggling to attract new flows as volatility persists.
While Federal Reserve Chairman Jerome Powell indicates there is no urgency to cut interest rates and geopolitical risks are pushing investors toward tangible assets, analysts stress that Bitcoin remains a high-risk investment until monetary policy is eased or global tensions calm.
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