BitMEX co-founder Arthur Hayes has forecasted a sharp downturn in the crypto market around the inauguration of US President-elect Donald Trump.
Hayes attributes this potential decline to a mismatch between crypto investors’ high expectations and the political realities Trump will face after taking office on Jan. 20.
According to him, many in the crypto industry are overly optimistic about the immediate impact of Trump’s administration on the market. However, he argues that Trump’s ability to implement sweeping policy changes will be limited.
Hayes explained that while investors expect rapid transformations, the political landscape offers no quick fixes. So, the market will likely realize that Trump has, at best, one year to enact meaningful changes before the focus shifts to the 2026 mid-term elections.
Hayes believes this impending realization could trigger significant sell-offs across the crypto sector and equities tied to Trump’s second term. This would mean that Bitcoin’s current rally to a record-breaking $108,000 might not be sustained as these political and economic realities set in.
Why Trump’s Timeframe is Limited
Hayes points out that US lawmakers will begin campaigning for the 2026 mid-term elections by late 2025.
With the entire House of Representatives and many Senate seats up for grabs, Trump’s Republican majority could quickly weaken. Hayes emphasizes that fixing the systemic issues fueling voter discontent would require years, not months, even for the most capable politicians.
He wrote:
“The issues that gave rise to Trump’s popularity are decades in the making. As such, there are no immediate solutions regardless of what Elon Musk tells you on X. Therefore, it is almost impossible for Trump to appease his base sufficiently to prevent the Democrats from retaking both legislative bodies in 2026.”
Despite his bleak prediction, Hayes remains prepared for alternative outcomes. His firm, Maelstrom, plans to reduce its holdings in anticipation of the downturn but is also ready to adapt if the bull market continues post-inauguration.
Hayes’ insights are a cautionary note for investors navigating the volatile intersection of crypto markets and political developments. While the future remains uncertain, his forecast illustrates the importance of tempered expectations and strategic planning in unpredictable times.
The market’s reaction to Fed Chair Jerome Powell’s statement that the Federal Reserve is not allowed to hold Bitcoin hints that Hayes’ suggestion of a delicate market balance holds weight.