Why Is Bitcoin Price Crashing? Arthur Hayes Isn’t Surprised
Overview
In a recent essay published on November 17, 2025, Arthur Hayes discusses the significant decline in Bitcoin’s price, attributing it to tightening dollar liquidity and the cessation of derivative-driven investments. Hayes emphasizes that Bitcoin serves as a reflection of global fiat liquidity expectations rather than daily news cycles.
The Current Situation
Hayes examines the circumstances surrounding Bitcoin’s recent price drop following its peak in October. He highlights that this decline is primarily linked to the reduction of “fake flows” into Bitcoin, which had been artificially inflated by derivative trading strategies. According to Hayes, Bitcoin acts as a “free-market weathervane” for global liquidity, meaning its price movements are closely tied to expectations of future money supply.
He recalls the events of April 2, 2025, when the Trump administration’s aggressive tariff policies led to market turmoil, initially causing fears of an economic downturn. However, after a truce was called on April 9, Bitcoin experienced a rally. Despite a subsequent decline in the USD Liquidity Index, Bitcoin’s price continued to rise temporarily, driven by ETF basis trades and Digital Asset Treasury vehicles.
Hayes is critical of the narrative surrounding institutional adoption of Bitcoin, particularly with regard to spot Bitcoin ETF flows. He points out that major holders of ETFs are primarily hedge funds and trading desks, which engage in basis trading rather than genuine interest in Bitcoin itself. This has created a misleading perception of institutional demand for Bitcoin.
As these basis flows diminished, the resulting sell-offs contributed to a negative feedback loop, impacting retail investors. Similarly, the issuance of Digital Asset Treasuries has created an optical illusion of demand for Bitcoin, which has now dissipated, leading to a necessary price correction.
Future Outlook
Hayes discusses the role of political decisions in shaping monetary policy, suggesting that the current administration must act decisively to influence market liquidity. He draws parallels to previous government actions that led to significant liquidity injections, which in turn positively affected various asset classes, including crypto.
Despite acknowledging potential short-term bullish arguments, Hayes remains cautious about the broader economic environment. He notes a significant contraction in dollar liquidity since July, which poses challenges for any anticipated recovery in the crypto market.
He has adjusted his company’s positioning in anticipation of lower crypto prices while still maintaining a long-term bullish outlook on certain assets, particularly privacy-focused cryptocurrencies like Zcash.
Impact on the crypto market
- Hayes attributes Bitcoin’s price decline to the end of derivative-driven investments and tightening dollar liquidity.
- The perceived institutional interest in Bitcoin is largely driven by trading strategies rather than genuine demand.
- The current market correction serves as a warning of potential broader economic stress, including a possible credit event.
- Political actions regarding monetary policy will be crucial in determining the future trajectory of Bitcoin and other cryptocurrencies.
- The dynamics of liquidity and market behavior indicate that Bitcoin’s price corrections could align more closely with fundamental economic indicators moving forward.
Updated: 11/18/2025, 9:27:37 AM
