BitMEX co-founder Arthur Hayes has revealed a correlation between Bitcoin’s price and the US dollar liquidity, highlighting the influence of mainstream factors on the cryptocurrency market.
In a recent analysis, Hayes highlighted how mainstream fiscal factors are currently dominating cryptocurrency market trends. He predicts the broader digital asset market will experience a significant resurgence immediately after the ongoing US government shutdown ends.
Hayes compared Bitcoin’s decline to the drop in the US liquidity index, with both financial metrics reflecting 5% and 8% pullbacks, respectively. However, the renowned analyst emphasized the timing of the event, noting that the pullbacks happened simultaneously, aligning with the raising of the US debt ceiling in July.
According to Hayes, reopening the US government will cause the Treasury General Account (Treasury Balances) to fall, which will have a seesaw effect on the US dollar liquidity and Bitcoin, by extension, the cryptocurrency market.
Bitcoin’s correlation with the mainstream financial sector has tightened significantly following the SEC’s approval of multiple spot ETF products nearly two years ago. Analysts argue this influx of institutional capital has fundamentally altered crypto market dynamics. The ecosystem now relies heavily on external macroeconomic factors, behaving more like a mainstream tech stock than a non-correlated hedge.
This shift explains why Bitcoin, historically viewed as a hedge during government instability, is now moving in tandem with the liquidity index during the current shutdown.
Hayes’ latest observation aligns with that line of thought, considering how the cryptocurrency, which historically served as a hedge during periods of mainstream financial instability, has moved in the same direction as the liquidity index.
For context, the ongoing US government shutdown triggered a crypto market collapse that saw BTC drop from over $120,000 to below $100,000 in less than one month. It is worth noting that the pullback happened during heightened bullish expectations, when most users expected the crypto market to rally based on technical and historical factors.
In the meantime, Bitcoin traded for $101,529 at the time of writing, according to data from TradingView. Recent attempts to reopen experienced a setback on Tuesday after the Senate for the 14th time to advance a House-passed continuing resolution to end the stalemate.
Nonetheless, many analysts consider the delay as a momentum build-up that would cause the market to surge rapidly when the shutdown ends.
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