Bitcoin, crypto market set for massive dump following Trump's inauguration: Arthur Hayes

Bitcoin (BTC) and the crypto market could face a massive sell-off as expectations for Donald Trump's administration of pro-crypto policies could be short-lived, according to Arthur Hayes.

Arthur Hayes speculates on possible crypto dump following Donald Trump's inauguration

In a blog post on Wednesday, Arthur Hayes, co-founder of BitMEX and CIO of Maelstrom, shared concerns about the impact of Trump's inauguration on the crypto market, suggesting that investors could encounter heavy losses in 2025.

Hayes argued that the divide between the crypto industry's over-optimistic expectations and the challenges of implementing meaningful policy changes would likely lead to a significant market downturn.

He also noted that there are no politically acceptable solutions for Trump to swiftly enact the sweeping policy changes many crypto investors anticipate. 

"I don't believe the markets realize how little time Trump actually has to accomplish anything. The market believes that Trump and his people can immediately achieve economic and political miracles," Hayes noted.

With Trump only having 2025 to introduce new policies, the limited timeline adds further pressure, heightening the risk of market disappointment.

"I believe the crypto markets will experience a harrowing dump around Trump's January 20, 2025 inauguration day," he added.

He highlighted that the time factor stems from the fact that most elected officials begin campaigning by late 2025 for the midterm elections in November 2026, including the House of Representatives. Hence, Hayes believes Trump has only one year to implement meaningful policy changes.

The crypto market has been in an uptrend since Donald Trump won the US presidential in November, with Bitcoin consistently reaching new highs.

Meanwhile, Hayes noted that Trump's promise of a Bitcoin Strategic Reserve could be a political maneuver aimed at strengthening the supremacy of the US dollar over other countries through a surge in Bitcoin's fiat price. He anticipated a scenario where the government would devalue the dollar against gold by printing new money to fuel their Bitcoin purchase.

This will invite competition from other sovereign nations trying to outmatch the US in holdings, further boosting Bitcoin's price. 

"The price of Bitcoin then would rise asymptotically, because why would anyone sell Bitcoin and receive fiat, which the government is actively devaluing," Hayes said.

On the flip side, he stated that Donald Trump may not keep to his promise of providing a strategic Bitcoin reserve because politicians are more likely to use newly created dollars to fund programs or benefits that appeal to voters, especially with another election approaching.

While Hayes doesn't believe the US government will buy Bitcoin, he notes that even the possibility of a strategic reserve for the asset is enough to drive demand and push prices higher.

He added that he would get back on track quickly if his prediction of a market dump in January backfired. "Knowing this, we are committed to admitting defeat if the bull market steamrolls through January 20, licking our wounds, and getting back on the bull," wrote Hayes.