Monetary Policy Theses: Follow Liquidity, Not Cycle

Hayes emphasizes the role of global monetary tightening in the significant value losses of 70–80% seen in 2014, 2018, and 2022. He explains that while the block reward halving represents a technical milestone indicating a supply shock, it is the trend in fiat liquidity that primarily dictates the direction. According to Hayes, the current narrative focused on the “cash abundance‑risk appetite” indicates that the four‑year block reward model will not be applicable this time.

According to Hayes, there is a common approach in Washington aiming to heat the economy and reduce housing costs to provide relief to households. Besides the Federal Reserve’s path of interest rate cuts, desire for economic expansion also favors risky assets. Beijing’s pursuit of reflation in response to the threat of low inflation is believed to support rather than absorb liquidity.

Macro Leverages Supporting Cryptocurrencies

In the US, the expectation of gradual easing by the Federal Reserve following the September interest rate cut points to a phase where dollar liquidity is no longer constricted. Markets are accounting for additional interest rate reductions totaling 100 basis points within 12 months, with expected relief in the yield curve anticipated to lower the discount rate for technology and cryptocurrencies. The supply‑demand balance, affected by ETF inflows and a contraction in supply on exchanges, is tilting upwards.

In Japan, the new prime minister’s alignment with Abenomics suggests that monetary conditions will remain accommodatively soft. In China, should the focus on fighting deflation translate into credit expansion and targeted stimuli directed at the real sector, regional liquidity pools could serve as an additional transmission channel for cryptocurrencies. Hayes summarizes his expectation saying, “Money will be cheaper and more abundant.”