Despite notching an all-time high above $126,000, 2025 ended on a sour note for Bitcoin (BTC). In fact, the crypto asset lagged gold and the Nasdaq in the same period.
BitMEX co-founder Arthur Hayes cited declining US dollar credit as the primary driver of underperformance.
Tight Dollar Credit
In his latest essay, “Frowny Cloud,” Hayes attributed Bitcoin’s weak showing last year primarily to a contraction in US dollar liquidity. He explained that dollar credit, described as the “most important force in 2025,” directly influenced the price dynamics of Bitcoin, gold, and US equities. He noted that while gold and the Nasdaq 100 rose during the year, Bitcoin underperformed relative to these assets due to the decline in fiat liquidity.
The prominent market observer added that sovereign nations increased their purchases of gold in response to geopolitical risks and US policy actions, including restrictions on Russia’s treasury holdings. These nations sought to reduce exposure to US treasuries, which ended up accelerating gold buying and strengthening its role as a global reserve asset.
Looking forward to 2026, Hayes expects a rebound in US dollar liquidity, driven by several factors. First, he anticipates an expansion of the Federal Reserve’s balance sheet through continued money creation and Reserve Management Purchases (RMP). According to his estimates, this will inject at least $40 billion per month into the system.
This expected rise in dollar liquidity could provide support for risk assets, including Bitcoin, as the central bank balance sheet grows and lending activity expands. He noted that BTC’s value historically correlates with fiat monetary expansion, as its proof-of-work blockchain benefits from an increased supply of US dollars. Hayes suggested that with liquidity poised to expand in 2026, Bitcoin could follow the upward trend established by other assets during periods of credit growth.
2026 Could Look Very Different
Hayes also mentioned that his firm has positioned for leveraged exposure to Bitcoin via equity instruments in companies such as Strategy and Metaplanet, which he believes could outperform Bitcoin if the cryptocurrency rises above key price levels. He additionally observed continued accumulation of Zcash (ZEC) and expressed confidence in the project’s development roadmap despite recent developer departures.
He compared Bitcoin and other assets to snow patterns and liquidity flows. Hayes concluded that while Bitcoin underperformed in 2025, the anticipated increase in US dollar credit in 2026, including growth in the Fed’s balance sheet, stronger bank lending, and lower mortgage rates, could provide renewed support for the cryptocurrency and other risk assets.