Bitcoin $125,000 Call in 2026 as ESRL Boosts USD Liquidity, War-Economy Trade

Arthur Hayes says Bitcoin could rise to $125,000 by year-end 2026, driven by a macro liquidity rebound and a shift from “AI credit deflation” fears to a “war economy” pricing regime. The key catalyst is the Enhanced Supplemental Leverage Ratio (ESLR), due April 1. Hayes argues ESRL lets commercial banks hold more Treasuries and repo assets, freeing about $1.3T for new lending and potentially supporting around $4T in additional credit. He also claims the rule is more likely to preserve dollar liquidity than tighten it. On the Fed, Hayes downplays hawkish concerns around Kevin Warsh. Even if the Fed shrinks its balance sheet, he argues tightening may be limited because bank lending has a larger lending multiplier than central bank credit. Hayes links the thesis to AI policy: AI capex being treated as a national-security priority could channel bank credit into AI infrastructure. He expects defense contractors and resource miners to benefit in a wartime-style credit cycle, potentially offsetting some credit destruction from AI-driven job cuts. Market signal: Hayes notes Bitcoin has started outperforming NASDAQ and major tech stocks, which he reads as rotation away from AI deflation risk toward inflation-and-conflict dynamics. He points to liquidity bottoming in November near Bitcoin’s price floor and expects a breakout if the projected liquidity expansion plays out.