BroadChain News, April 28 - According to NewsBTC, BitMEX co-founder Arthur Hayes stated at the Bitcoin 2026 conference that the macro environment for Bitcoin is turning bullish again. War spending, the US fiscal deficit, and bank credit creation will offset the negative impact of the Federal Reserve's balance sheet reduction. He believes Bitcoin is increasingly trading as a response to "wartime inflation," rather than being solely driven by the AI cycle.
Hayes pointed out that governments are openly preparing to increase defense spending, which ultimately needs financing, bringing Bitcoin back into familiar territory as a liquidity-sensitive asset and a hard currency narrative. He noted that since the start of the war, Bitcoin has outperformed the Nasdaq and SaaS stocks, and is currently focusing on "wartime inflation."
Hayes argued that market concerns about a potentially hawkish Fed Chairman Kevin Warsh overlook real constraints—when the US government is still issuing massive amounts of debt, the Fed cannot shrink its balance sheet in a vacuum. He expects a balance sheet restructuring between the Fed and the commercial banking system, where commercial banks reduce their holdings of Fed reserves and instead absorb Treasury bonds and repos, allowing the Fed to nominally shrink its balance sheet while overall dollar liquidity remains neutral.
Hayes linked this shift to the relaxation of US banking regulations, particularly the Enhanced Supplementary Leverage Ratio (ESLR) adjustment that took effect on April 1. Citing S&P Global estimates, he noted that the ESLR balance sheet reduction could free up $1.3 trillion in new loans. War spending, critical resource production, and AI infrastructure are becoming national security priorities, creating government-backed loan demand for banks.
Hayes expects banks to lend to defense suppliers, resource miners, and hyperscale computing companies, potentially creating about $4 trillion in credit. He stated that his liquidity chart bottomed out in November last year, which became the basis for his renewed bullish stance, with a target price of $125,000.