Bitcoin To $125,000: Arthur Hayes Says The Setup Is Turning Bullish

Arthur Hayes says Bitcoin’s macro setup is turning bullish again, arguing that wartime spending, US fiscal deficits and bank-led credit creation could outweigh fears of a smaller Federal Reserve balance sheet. Speaking at the Bitcoin 2026 conference in Las Vegas, the BitMEX co-founder said Bitcoin is increasingly trading as a response to “wartime inflation,” not just the artificial intelligence cycle.

“Since the war has started, Bitcoin has outperformed,” Hayes said. “It outperformed NASDAQ and outperformed the SaaS stocks. And basically, I think that Bitcoin is now focusing on wartime inflation.”

The core of Hayes’ argument was not that the Fed will suddenly return to explicit quantitative easing. Instead, he focused on what he described as a likely balance-sheet reshuffling between the Fed and the commercial banking system, one that could allow officials to claim the Fed is shrinking while leaving the broader dollar liquidity picture largely intact.

According to Hayes, Warsh would be constrained by the Treasury’s need to keep the bond market functioning. He argued that the Fed cannot pursue balance-sheet reduction in a vacuum when the US government must continue funding large deficits.

“At the end of the day, when you’ve issued $38 trillion of debt and you need to fund the government, the Federal Reserve will do what it’s asked to do, which is make sure the market is orderly so that people can buy this debt,” Hayes said.

Hayes’ central mechanism is a swap: commercial banks reduce their holdings of Fed reserves and replace them with Treasuries and repos. In that scenario, the Fed’s balance sheet can become smaller on paper, while the banking system absorbs more government debt.

“The point of all this is that the net effect on dollar liquidity is neutral,” Hayes said. “There’s nothing being sold, there’s nothing being bought. It’s just a swap. It’s purely regulatory fiction in terms of who is allowed to hold what.”

That distinction matters for Bitcoin because Hayes says investors should care less about the stated size of the Fed’s balance sheet and more about whether the overall system is creating or destroying dollar liquidity. If debt simply migrates from the Fed to regulated bank balance sheets, the impact may be far less restrictive than markets fear.

Hayes linked that transition to US banking deregulation and specifically cited changes to the Enhanced Supplementary Leverage Ratio, which he said went live on April 1. In his telling, the rule change allows large banks such as JPMorgan and Citibank to absorb more Treasuries and repos, while smaller banks can expand construction and industrial lending.

He also cited an S&P Global estimate that the ESLR balance-sheet reduction could generate $1.3 trillion of new loans.

Hayes argued that the demand side of the lending cycle is already visible. Defense spending, critical resource production and AI infrastructure are all becoming national-security priorities, he said, creating borrowers with government-backed demand and therefore more attractive credit profiles for banks.

“Why will banks have demand for loans? One of the criticisms about this analysis from some of my other macro-fans is that they claim the banking system is not creating enough loans or there’s not enough demand,” Hayes said. “Well, we have a great source of demand that is the US Department of War.”

He said banks would lend to defense suppliers, resource miners and hyperscalers as AI capital expenditure becomes part of the national-security framework. Hayes described bank lending as especially important because, in his view, it carries a higher multiplier than central bank lending, estimating that around $4 trillion in credit could ultimately be created.

“I think we’ve had a bit of a chop. We’ve had a bit of a war. Now it’s time to break out,” Hayes said. “And that’s why I believe Bitcoin is going higher. I think my end of year choice target is like $125,000, whatever, it doesn’t fucking matter, I’m wrong anyways.”

At press time, Bitcoin traded at $76,628.