Bitcoin could drop to $70,000 if stock markets fall 20-30%, but it is set to increase tenfold due to economic stimulus from the Federal Reserve, according to former BitMEX CEO Arthur Hayes.

In his latest essay, “Kiss of Death”, Hayes analyzes Bitcoin through the lens of U.S. national debt and ways to manage it.

He argues that Donald Trump’s policies could trigger a recession, forcing the Fed to intervene. While Bitcoin remains in a bull run targeting $1 million, its worst-case scenario is a correction to $70,000.

The Role of Trump and the Fed

Hayes believes Trump will tackle economic challenges by increasing borrowing. He highlights the interaction between the U.S. Treasury and the Fed, where money supply (via the “printing press”) and interest rates are key tools.

He also calls Fed Chair Jerome Powell a political turncoat, accusing him of cutting rates in September 2024 to help Kamala Harris in the election, only to later focus on fighting inflation under a Republican administration.

A key issue, according to Hayes, is the conflict between Powell and Treasury Secretary Scott Bessent, as they serve different political interests. Bessent aims to extend the maturity of U.S. Treasuries to ease the debt crisis, while Powell controls credit supply and pricing through various tools.

Convincing Powell to resume money printing and cut rates while maintaining the Fed’s inflation mandate is a challenge for Trump.

Trump’s Strategy

To push Powell into action, Trump might engineer a recession or create the perception of one. This could lead the Fed to cut rates, halt quantitative tightening (QT), restart QE, and ease bank leverage rules.

According to Hayes, one of Trump’s key tools could be Elon Musk’s Department of Government Efficiency (DOGE), which could cut government spending and shrink GDP through a multiplier effect.

DOGE could eliminate wasteful payments and replace bureaucrats with automation, potentially saving hundreds of billions of dollars annually. However, this would also trigger mass layoffs—Hayes estimates 400,000 government job losses in 2025, worsening the labor market.

With rising unemployment claims, declining home prices, and weaker consumer spending, recession fears would escalate, forcing Powell to respond.

The Cost of Crisis

Hayes estimates that for each 0.25% rate cut, $100 billion in liquidity is injected into the system. If the Fed lowers rates to zero from 4.25%, it would release $1.7 trillion.

Ending QT would free up $60 billion per month—or $540 billion annually. Restarting QE and relaxing leverage rules could add another $0.5T to $1T.

In total, Hayes predicts a $2.74T to $3.24T stimulus package, roughly 70-80% of the COVID-era stimulus ($4T from 2020-2022).

Bitcoin surged 24x from its 2020 lows to 2021 highs amid those massive liquidity injections. Given Bitcoin’s larger market cap today, a 10x gain is more realistic—bringing it to $1 million per BTC.

Key Assumptions

Trump will fund his “America First” strategy through debt.
The DOGE department will cut spending, increasing the risk of recession.
The Fed will react by injecting liquidity and lowering borrowing costs.

However, Hayes remains skeptical about Trump’s crypto reserve strategy, arguing that real market impact would only occur if the U.S. government starts purchasing digital assets. For that, Trump would need Republican backing to raise the debt ceiling or revalue gold—something Hayes warns shouldn’t be rushed.

Trading Strategy

Hayes notes that Bitcoin’s price action signals a liquidity crisis, despite strong U.S. stock markets. A Wall Street correction due to recession fears is inevitable.

Bitcoin will likely experience major volatility, but panic and Fed intervention will push it to new highs after hitting a bottom.