- Arthur Hayes links bond market stress to forced selling, driving liquidity strains across traditional and crypto markets.
- Bitcoin may decouple from equities as rising yields force the Fed toward renewed liquidity support.
- Hayes sees a potential repeat of 2020’s Bitcoin rally if QE measures are reintroduced by the Federal Reserve.
BitMEX co-founder Arthur Hayes has warned that the recent spike in U.S. Treasury yields could disrupt traditional markets and potentially push the Federal Reserve to reintroduce liquidity measures. The benchmark 10-year yield reached 4.50 percent to become a six-week peak which caused apprehension throughout worldwide markets.
The rising pressure on U.S. bond yields stems from market-wide liquidity challenges according to analyst assessments even though traders blame foreign investors for the problem.
Forced Selling Deepens Market Instability
As yields surged, large hedge funds were forced to unwind leveraged bond positions, accelerating market selloffs. Analysts, including Jim Bianco have noted that the rise in yields is linked to margin calls and deleveraging in traditional finance. The process puts additional pressure on both bonds and equities, as it leads to rapid asset liquidations. Recent sessions show that Bitcoin market instability has affected the cryptocurrency sector.
The turbulent situation has not stopped Bitcoin from reverting to its value at $82,000. Hayes believes the asset could behave differently this time compared to earlier market shocks. Previously, Bitcoin closely mirrored equity selloffs. However, he now suggests that the current bond market crisis may pave the way for a stronger Bitcoin performance, especially if the Federal Reserve intervenes to stabilize financial markets.
Fed Intervention Could Shift Momentum
According to Hayes, the current environment could push the Fed toward a new phase of quantitative easing or even yield curve control. If the bond market becomes dysfunctional, the Fed may have no choice but to inject liquidity to restore stability. Hayes argues that Bitcoin would benefit from such measures, just as it did following the Fed’s actions in March 2020. At that time, Bitcoin rose from under $10,000 to nearly $69,000 in 18 months.
Hayes also suggests that Bitcoin could break away from its correlation with stocks if the Fed takes decisive action. He highlights that liquidity-driven rallies tend to favor Bitcoin early, as digital assets often front-run macro policy shifts. Although near-term volatility remains possible, the long-term setup appears favorable if central bank support returns.
