Arthur Hayes says Bitcoin’s fundamental setup is changing as well, arguing that wartime spending, the US recession and bank-led debt consolidation could outweigh the Federal Reserve’s small-time fears. Speaking at the Bitcoin 2026 conference in Las Vegas, the co-founder of BitMEX said that Bitcoin is trading more and more as a response to “warfare inflation,” not just a smart cycle.
Hayes recorded the latest change in the simple concept: governments are openly planning to spend more on defense, and the money spent on the latter must be paid for. In his opinion, this puts Bitcoin back into the mainstream as a cashless asset and a hard currency.
“Since the start of the war, Bitcoin has won,” Hayes said. “It outperformed the NASDAQ and outperformed SaaS stocks. And in fact, I think Bitcoin is now facing a bullish price war.”
Collaborative Reading
The main point of Hayes’ argument was not that the Fed would suddenly return to reducing inflation. Instead, he focused on what he described as a trade-off between the Fed and commercial banking systems, which would allow officials to say the Fed is shrinking and leaving the dollar’s monetary picture behind.
Bitcoin vs. The story of the Hawkish Fed
Hayes spoke to the market concerns about Kevin Warshwho said investors see him as a potentially dangerous Fed chair for criticizing the central bank. Hayes said the fear misses the challenges facing financial officials as the U.S. government issues more debt.
“If the market believes that there will be less dollars circulating in the system because of what Warsh is going to do with the Fed, then they will stay on Bitcoin and other risky assets,” Hayes said. “This is what we have seen in the press talking about it hawkish Fed that will arrive in place after May when Warsh takes over. Now, I don’t believe that’s the case.”
According to Hayes, Warsh would be forced by the Treasury’s need for the bond market to function. He also said that the Fed could not pursue a rate cut that would require the US government to continue issuing large amounts of money.
“At the end of the day, when you issue $38 trillion in debt and you need government money, the Federal Reserve is going to do what’s asked of it, and make sure that the market is moving in an orderly manner so that people can buy that debt,” Hayes said.
Bank Balance Sheet Trade
Hayes’ central strategy is a swap: commercial banks reduce their holdings of Fed reserves and replace them with Treasuries and repos. In this scenario, the Fed’s balance sheet would be smaller on paper, while banks would take on more government debt.
“The point of all of this is that the effect on the dollar economy is neutral,” Hayes said. “Nothing is being sold, nothing is being bought, it’s just an exchange. It’s just speculation about who is allowed to have what.”
That distinction is important for Bitcoin because Hayes says investors should not care about the size of the Fed and whether the entire system is creating or destroying the dollar. If credit simply moves from the Fed to a regulated bank, the impact may be less severe than the market fears.
Collaborative Reading
Hayes agreed that the change in banking in the US was removed and in particular he mentioned the change to the Enhanced Supplementary Leverage Ratio, which he said came into effect on April 1. In his words, the change in the law allows large banks such as JPMorgan and Citibank to take more assets with repos, while smaller banks can increase the construction and industrial lending.
He cited S&P Global’s estimate that the ESLR downgrade could create $1.3 trillion in new loans.
Military Use Becomes a Demand Engine
Hayes argued that the important side of lending is already visible. Security applications, critical manufacturing and AI infrastructure are all becoming more important to national security, he said, creating government-backed lenders and therefore better banking reputations.
“Why would banks want loans? One of the criticisms of this review from some of my closest friends is that they say banks don’t make enough loans or there aren’t enough resources,” Hayes said. “Well, we have a very important source which is the US Department of War.”
He said banks will lend to security vendors, miners and hyperscalers as AI funds become part of national security. Hayes described bank lending as very important because, in his opinion, it increases central bank lending, estimating that $4 trillion in debt can be created.
That’s the basis for the return of bullishness. Hayes had his say Liquidity chart below in November last year, almost at the same time as Bitcoin, and said that after a period of war driven by uncertainty, the market is now ready to move higher.
“I think we had a little bit of a problem. We have a little bit of a battle. Now it’s time to start,” Hayes said. “That’s why I believe Bitcoin is going forward. I think my target for the end of the year is like $125,000, whatever, it doesn’t matter, I’m wrong.”
At press time, Bitcoin traded at $76,628.
Graphic design by DALL.E, chart from TradingView.com
