Arthur Hayes Has a Message for Crypto Investors and Bitcoin (BTC) HODLers Obsessing Over Federal Reserve Policy

Arthur Hayes, the outspoken co-founder of crypto exchange FTX, has a warning for bitcoin (BTC) investors: you're obsessing over the wrong U.S. institution.

It isn't Federal Reserve Chair Jerome Powell or the risings rates that matter most, but rather Treasury Secretary Scott Bessent, who is quietly pulling the monetary levers to manage a ballooning U.S. debt load.

“The real show is at the Treasury Department. Ignore the Fed. It doesn't matter,” Hayes told CoinDesk in a recent interview. “Powell didn't matter in 2022 under a Democratic regime, and he doesn't matter now under a Republican one.”

For Hayes, the Federal Reserve has become a sideshow. The real lever-pulling is happening under Bessent, who is juggling buybacks and auction strategies to reshape global liquidity.

“The optimists among us like to say that the U.S. administration is pivoting toward stability and rational economic policies,” Hayes said. “The pessimists might say that the good times are coming to an end and that the U.S. is resorting to desperate measures to avoid default.”

Ultimately, both outlooks converge on one point: there will be less, not more, liquidity in the system. And that, in the co-founder's view, bodes well for bitcoin.

“All we care about is whether there are more dollars in the system today than yesterday. That's all that matters. We don't care about the rate of change in the U.S. capital account or the trade balance. None of that matters,” Hayes said.

The co-founder also touched upon the U.S. and China's performative trade diplomacy, which he said will likely culminate in a shallow deal as both sides are forced into cooperation.

“It's going to be a deal on the surface. Trump needs to be able to go back and say he was tough on China. Xi needs to be able to say that he stood up to the white man,” Hayes said.

With tariffs proving politically risky, Hayes thinks the next move will be taxing foreign investment, a quiet form of capital control meant to reduce America's dependence on foreign buyers without spooking domestic voters. This is how you get the American people to swallow a realignment of trade.

“The only real policy that actually works is capital controls. But would the American people stomach that?” he asked.

Potentially, there are multiple tools on the table. Not just taxes on foreign-held Treasuries or equities, but more aggressive ideas like forced bond swaps, trading 10-year notes for 100-year paper, or higher withholding taxes on capital gains from U.S. assets.

It's all part of a strategy to rebalance the financial account without forcing Americans to “buy less stuff,” a message he says no politician can sell.

“Americans don't like to do hard things. They don't want to be told that you have to consume less. They want to be told that we're going to pivot and that we're going to put capital controls on foreigners,” Hayes said.

China, meanwhile, isn't going anywhere. Hayes says it has no choice but to keep buying U.S. assets even if it pretends otherwise.

“They have to obfuscate kind of how much stuff they're buying off of America. But if you're doing the math, they just can't stop.”