In a keynote address at Bitcoin 2025, Arthur Hayes, former CEO of BitMEX, delivered a powerful presentation titled "It's F**king Maths." He outlined the macroeconomic forces and policy shifts that could propel Bitcoin to $1 million. His analysis focuses on U.S. fiscal policy, debt management, and the potential injection of massive liquidity into the financial system.
The U.S. Treasury Secretary's Mandate
The new U.S. Treasury Secretary, Scott Bessent, brings experience from his time working with George Soros, where he contributed to breaking several sovereign currency pegs. He understands what the U.S. economy needs to succeed amid current challenges.
Bessent's role is akin to a salesperson—his product is U.S. government bonds. His job is to ensure the government can finance itself by selling debt. However, bonds have underperformed compared to other assets.
Since 2017, the total supply of U.S. Treasury debt has increased by approximately 80%. Compared to assets like the Nasdaq 100, gold, and Bitcoin, bonds have significantly lagged. For instance, the Nasdaq 100 outperformed bonds by about 80% over this period. Similarly, gold and Bitcoin saw even greater outperformance.
This underperformance means investors seeking to maximize returns will increasingly avoid government bonds. This creates a challenge for Bessent: how to ensure continued demand for U.S. debt as investors seek higher-yielding alternatives.
U.S. Debt Deficit and Inflation
The U.S. fiscal year begins in October. Despite rhetoric about controlling government spending, the deficit for fiscal year 2025 is already higher than in 2024, which was a record year for deficits.
Political efforts to cut spending, such as those championed by figures like Elon Musk, have faced backlash. Every dollar of government spending benefits someone, and cutting it adversely affects many individuals and businesses. As a result, these efforts have been dialed back.
To balance the books without cutting spending, the government must pursue nominal GDP growth that exceeds its interest costs. This is challenging without increasing the amount of credit in the economy. As Hayes notes, growth is often a function of how much credit is injected into the system.
If the administration aims for 6–7% nominal GDP growth, it must create corresponding credit. This credit creation leads to inflation, which is necessary for the government to manage its debt burden. Bitcoin serves as a hedge against this inflation.
The Path to $1 Million Bitcoin
Hayes identifies three key mechanisms that could drive Bitcoin to $1 million:
Capital Controls and Tariffs
Tariffs can lead to higher商品 prices and empty shelves, which are unpopular with consumers. Instead, capital controls can achieve similar economic rebalancing. Some economists suggest revoking tax benefits for foreign investors in U.S. assets and redistributing those funds to voters or using them to buy specific Treasury bonds.
This approach could raise over $1 trillion in a decade by taxing foreign holders. To encourage demand for long-term bonds, the government might impose low taxes on them and higher taxes on short-term Treasuries. This acts as a mild form of yield curve control.
If foreign demand decreases, the government may print money to cover the shortfall, increasing liquidity.
Bank Leverage Exemptions
The Supplementary Leverage Ratio (SLR) is a key regulation post-2008 financial crisis that requires banks to hold capital against their assets, including Treasuries. An exemption would allow banks to buy Treasuries with infinite leverage, meaning no capital requirements.
Treasury Secretary Bessent has emphasized that he expects this exemption to be granted this summer. Jamie Dimon, CEO of JPMorgan Chase, has publicly supported this move.
Combining SLR exemption with the issuance of non-interest-bearing stablecoins by U.S. banks could create significant profit opportunities. Banks could issue stablecoins, use the funds to buy Treasuries, and earn substantial net interest income.
👉 Explore more strategies for leveraging financial shifts
Unleashing Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that were placed under government conservatorship after the 2008 crisis. freeing them could allow them to leverage their equity 33 times and purchase up to $5 trillion in mortgages.
This would inject $5 trillion of liquidity into the market, stimulating the housing sector and broader economy.
The Math Behind $1 Million Bitcoin
Hayes provides a straightforward calculation:
- QE for the People: Encouraging banks to lend to the real economy could generate up to $3 trillion in bank credit by 2028.
- Bank Treasury Purchases: If foreign demand for Treasuries falls by $900 billion, commercial banks could step in using infinite leverage.
- GSE Liquidity: freeing Fannie and Freddie could add $5 trillion in liquidity.
Combined, this could result in nearly $9 trillion of new money printed by 2028.
During the COVID-19 pandemic, approximately $4 trillion was injected into the economy. Bitcoin rose about 10x from its March 2020 low to its November 2021 high of $69,000.
Since price is determined by marginal demand, not total supply, the reduction of Bitcoin on exchanges due to ETF demand—coupled with double the money printing compared to COVID-19—could easily push Bitcoin to $1 million.
Frequently Asked Questions
Why does Arthur Hayes believe Bitcoin can reach $1 million?
Hayes points to massive potential liquidity injection from U.S. policy changes, including bank leverage exemptions, GSE reactivation, and credit expansion. These could create up to $9 trillion in new money, driving demand for scarce assets like Bitcoin.
What is the Supplementary Leverage Ratio (SLR) exemption?
SLR requires banks to hold capital against assets. An exemption would allow unlimited Treasury purchases without capital constraints, potentially letting banks profit significantly and increase liquidity.
How do Fannie Mae and Freddie Mac impact Bitcoin?
If freed from conservatorship, they could leverage up and inject $5 trillion into the mortgage market. This liquidity could flow into various assets, including Bitcoin, boosting its price.
What role do capital controls play?
Revoking foreign tax exemptions could reduce demand for U.S. debt, forcing the government to print money to compensate. This devalues the dollar and benefits hard assets like Bitcoin.
Is inflation necessary for Bitcoin's growth?
Yes, Hayes argues inflation is essential for the government to manage debt. Bitcoin, as a hedge, gains value as fiat currency depreciates.
How does bond performance affect Bitcoin?
Bonds' underperformance vs. assets like Bitcoin leads investors to seek better returns. This shift reduces debt demand, prompting more aggressive fiscal policies that boost Bitcoin.