Fed’s SRF Enables Hidden QE, Spurs Bitcoin Rally Amid Rising US Debt
Arthur Hayes warns that surging US Treasury issuance is forcing marginal buyers, especially Cayman hedge funds, to rely on overnight repo financing. This has pushed the Secured Overnight Financing Rate (SOFR) above the Fed funds rate ceiling. To alleviate cash strains, the Federal Reserve’s Standing Repo Facility (SRF) now acts as a lender of last resort, providing unlimited collateralized cash. This hidden QE expands base money off-balance-sheet and boosts global dollar liquidity without formal asset purchases. As SRF usage climbs, Hayes predicts it will trigger a new Bitcoin bull market. Traders should brace for volatility amid a looming U.S. government shutdown and monitor SRF injections as a gauge of hidden QE. Accumulating Bitcoin while preserving capital is advised ahead of expected upward momentum.
Bullish
The deployment of the Fed’s SRF as hidden QE injects significant liquidity into the financial system. This off-balance-sheet base money expansion is likely to drive demand for Bitcoin as a hedge against dollar debasement. In the short term, traders may see increased volatility around SRF usage data and the government shutdown resolution. In the longer term, sustained asset flows into crypto markets are expected, underpinning a bullish outlook for Bitcoin.