"Hallelujah": Arthur Hayes's View on Hidden Quantitative Easing
Date: 2025-11-05 Author: Gabriel Deangelo Categories: BUSINESS
Former BitMEX CEO Arthur Hayes has released a new essay, "Hallelujah," in which he explains why the US Federal Reserve will be forced to support the financial system through hidden forms of quantitative easing in the coming years. He believes that growing US government debt will inevitably lead to an expansion of dollar liquidity, which, in turn, will pave the way for Bitcoin's growth.
Hayes begins by arguing that time and compound interest are the same for everyone—even governments. The government has only two sources of funding: taxes and borrowing. Raising taxes is unpopular, so politicians prefer debt financing, shifting the burden onto future administrations. As a result, the US is becoming increasingly dependent on borrowed funds.
The main question Hayes raises is who is financing this debt and with what funds. He identifies several categories of buyers of US bonds. Following the freeze on Russian assets, foreign central banks are wary of holding Treasury securities and are increasingly switching to gold. The US private sector is also unable to fully cover the government's needs, as savings are less than the budget deficit. Commercial banks are buying bonds, but their participation is relatively limited.
Relative Value Funds (RVFs) play a key role. They actively purchase bonds using borrowed financing through the repo market. The essence of their strategy is to profit from the tight spreads between spot and futures prices, using high leverage. To achieve this, the RVFs borrow against the very securities they purchase.
Regulating short-term rates is a key function of the Federal Reserve. To keep the SOFR rate within its range, the regulator uses three tools: the reverse repurchase program (RRP), the interest-on-reserve-based rate (IORB), and the standing repo facility (SRF). The latter has essentially become a safety net, providing unlimited liquidity secured by government bonds.
Hayes notes that the active use of the SRF effectively replaces classic QE, as the Fed creates new dollars without calling it direct issuance. This "hidden" easing helps maintain demand for government debt and prevents a liquidity crisis. However, as the volume of SRF transactions increases, the money supply also increases, which could eventually accelerate inflation and strengthen Bitcoin's position as a safe-haven asset.
According to Hayes, the current market volatility is not the end of the cycle. While the US Treasury is actively issuing bonds, liquidity is contracting, but after government operations normalize and hidden easing continues, dollar liquidity will increase again. And along with it, Hayes is confident, Bitcoin's bullish trend will resume.
