TL;DR
- Hayes warns that Scott Bessent is replicating Janet Yellen’s liquidity strategy, prioritizing short-term debt over long-term bonds.
- Yellen released nearly $2.4 trillion into the market by selling more Treasury bills, which boosted Bitcoin and the Nasdaq 100 while the Fed held rates at 5.3%.
- Bessent’s latest increase in long-term bond buybacks added just $20 billion against a federal debt of approximately $40 trillion.
Arthur Hayes, co-founder of BitMEX, published a new essay titled “Same Same But Different” in which he compares the Treasury financing policy of the United States under Janet Yellen with the one currently being implemented by Secretary Scott Bessent.
The central idea is concise: although Bessent presented himself as a distinct voice, he is falling back on the same liquidity playbook as his predecessor when long-term Treasury yields threaten to exceed 5%.
Hayes’s Analysis
Hayes’s analysis begins in the last quarter of 2023. Yellen chose to issue more Treasury bills —instruments maturing in less than a year— and reduce the placement of long-term bonds. Money market funds, which historically parked their cash in the Federal Reserve’s Reverse Repo Program (RRP), began migrating toward those bills because they offered a higher yield than the RRP.
The result was a decline in the RRP balance from approximately $2.5 trillion to just $100 billion by January 20, 2025, the day Bessent took office. Hayes quantifies that contraction as $2.4 trillion of liquidity indirectly injected into markets, which explains, according to his analysis, the rally in Bitcoin and the Nasdaq 100 even as the Fed held rates at their highest level since 2008 and reduced its balance sheet.
The 5% Threshold and the Debt Trap
For Hayes, the 10-year bond yield is the crux of the problem. That level feeds mortgages, corporate debt and consumer credit, which means both secretaries have structural incentives to prevent it from exceeding 5%. Bessent announced on August 19 an increase of $20 billion in long-term bond buybacks. Yields fell and Bitcoin rose for two sessions, but within days yields climbed back above the levels seen before the announcement.
Hayes considers that figure insignificant against a federal debt of nearly $40 trillion. He also notes that Bessent backed a broader use of the FIMA mechanism, which allows foreign holders —including Japan— to borrow dollars created by the Fed against their Treasuries instead of selling them, another covert liquidity valve.
The MOVE index sitting above 130 and the drawdown of the Treasury General Account, which stands at around $1 trillion, are the indicators Hayes monitors to anticipate larger-scale interventions. For Bitcoin investors, his recommendation is to avoid leverage and hold exposure while watching Bessent’s next moves on liquidity.
