Arthur Hayes argues that the next phase of the crypto cycle will not be driven by a shift to quantitative easing, but by a “stealth” version executed through the Federal Reserve’s Standing Repo Facility (SRF). In a new essay titled “Hallelujah,” published on November 4, 2025, the former CEO of BitMEX lays out a balance sheet-based argument that persistent U.S. budget deficits, hedge fund demand for Treasuries financed through repos, and the Fed’s need to limit funding stress will translate into incremental dollar liquidity that will ultimately “drive up the price of Bitcoin and other cryptos.” Like him frames the core mechanism: “Government-issued debt increases the money supply.”
Hayes’ logical chain begins with an observation of political incentives and the arithmetic of public finances. Governments can finance spending with “savings or debt,” and he said elected officials “will always prefer to borrow from the future to get re-elected in the present.” For the United States, he claims the path has already been set: “Here are the estimates from the TBTF bankers and a few US government agencies. As you can see, the estimates are for deficits of ~$2 trillion, financed by ~$2 trillion in loans.” Once one accepts in his model that “the annual federal deficit = the annual amount of national debt,” the next crucial question is who actually buys that debt, and with what financing.
Fed’s Stealth QE Will ‘Pump’ Cryptocurrency
He dismisses foreign central banks as reliable marginal buyers after the US sanctioned and immobilized Russia’s reserves in 2022. “If Pax Americana is willing to steal Russia’s money… then no foreign owner of government bonds is ever safe,” he writes, concluding that reserve managers “would rather buy gold than government bonds.” He also downplays the capacity of the U.S. household sector, given that “the personal savings rate was 4.6% in 2024” while “the U.S. federal deficit was 6% of GDP,” and argues that the largest U.S. money center banks increased their Treasury bonds by only “~$300 billion” in fiscal 2025 against issuance of “$1,992 billion,” making them meaningful but not decisive.
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Instead, Hayes positions relative value hedge funds – especially those that book positions through Cayman vehicles – as the marginal, price-setting bid for US maturity. Citing a recent Federal Reserve study, he quotes: “Cayman Islands hedge funds have purchased a net $1.2 trillion in government bonds… [between] January 2022 and December 2024… [and] absorbed 37% of net issuance of notes and bonds.” The trading architecture is simple: ‘Buy a cash government bond versus sell the corresponding government futures contract’, then tap the small base through repo financing. Because the edge is ‘measured in basis points’, the trade only works if the leverage is cheap and predictable every day.
That funnel leads directly to the SRF. Hayes outlines the Fed’s short-term interest rate corridor – ‘Upper and Lower Fed Funds; currently these are 4.00% and 3.75% respectively’ – and the policies that keep the market interest rate within this: the Reverse Repo Facility (RRP) at the lower limit for money market funds (MMFs) and banks, interest on reserve balances (IORB) for banks in the middle, and the SRF at the upper limit as an emergency tap.
Lower Fed Funds = RRP < IORB < SRF = Upper Fed Funds,” he summarizes, adding that the target, SOFR, normally fluctuates within the range. Stress arises “when SOFR trades above the Upper Fed Funds,” which he calls “a problem” because “the dirty fiat financial system shuts down” once participants cannot stably roll over their leverage overnight.
According to him, the money supply covering the SOFR is structurally smaller than when the Fed started quantitative tightening in early 2022. Money market funds, he says, have reduced RRP to zero because “the yields on government bonds are so attractive,” making them less available as repo cash providers. That leaves the banks, which will provide liquidity as long as they have sufficient reserves, but “the banks have lost trillions in reserves since the Fed started QT.”
This reduced supply of cash is offset by the relentless demand for repo financing from RV funds, whose ‘marginal’ government bond purchases must be leveraged. If the SOFR threatens to breach the ceiling and the repo becomes unreliable, the Fed’s SRF must hold the system back to prevent a funding accident. “Because a similar situation arose in 2019, the Fed created the SRF,” Hayes wrote. “The Fed can supply an infinite amount of cash using its printing press at SRF, as long as an acceptable form of collateral is provided.” His conclusion is blunt: “If SRF balances rise above zero, then we know the Fed is cashing politicians’ checks using printed money.”
Hayes calls this dynamic ‘Stealth QE’. He argues that the optics of outright balance sheet expansion via asset purchases is now politically toxic – “QE is a dirty word… QE = money printing = inflation” – so that the central bank will prefer to meet marginal demand for dollars through SRF lending rather than by creating visibly excess reserves.
What this means for the crypto market
The result, he says, is functionally similar from a liquidity perspective: repo credits issued by the Fed against Treasuries still increase the disposable dollars in the system to finance Treasuries. “This will buy some time, but ultimately the exponential expansion of government bond issuance will force the repeated use of the SRF,” he writes. “Stealth QE will start soon. I don’t know when it will start. But… the SRF balance needs to grow as a lender of last resort. As the SRF balance grows, so does the amount of fiat dollars in the world. This phenomenon will reignite the Bitcoin bull market.”
He also lays out a near-term tactical background that helps explain the recent market tone in crypto. While auctions attract cash to the Treasury’s General Account, he notes, budget spending has been temporarily hampered by the government shutdown, which has created a net decline in private sector liquidity.
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“The Treasury General Account is ~$150 billion above the $850 billion target,” he writes, arguing that this “additional liquidity will not be released into the markets until the government reopens,” contributing to the “current softness in crypto markets.” In other words, the same fiscal engine that ultimately forces the Fed’s hand through the SRF could undermine liquidity in the very short term as issuance increases spending.
Hayes’ rhetoric remains deliberately sharp. He describes government bonds as “dog shit” at current real yields, calls the buy side “debt eaters” and opens with a hymn to the monetary properties of Bitcoin: “Praise be to Lord Satoshi that time and compound interest exist, no matter who you are.” The provocation serves the point: if the marginal financing of US deficits increasingly relies on opaque safety nets rather than transparent reserve creation, then crypto’s own non-sovereign liquidity cycles will unlock the same hidden plumbing. He summarizes the investment outcome in a single sentence: “Government debt issued = increase in supply of dollars.”
The essay is not an agenda discussion. Hayes refuses to put a time stamp on the turnaround – “I don’t know when it will start” – and he warns that “between now and when stealth QE starts, one needs to deploy capital. Expect a choppy market,” especially with shutdown dynamics disrupting flows.
But he is unequivocal about the direction once SRF use becomes persistent: “Stealth QE will begin soon… [and] will revive the Bitcoin bull market.” For crypto investors conditioned to watching CPI prints and FOMC points, the message is to follow the microstructure of the money market instead. In Hayes’ framework, when SRF balances stop being a rounding error and start trending, it’s a sign that dollar liquidity has quietly turned around – and crypto isn’t peaking yet.
At the time of writing, the total crypto market capitalization was $3.41 trillion.
Featured image created with DALL.E, chart from TradingView.com