Bitcoin Temporarily Dips due to U.S. Liquidity Shrinkage as Foreseen by Arthur Hayes
In the rapidly evolving world of cryptocurrencies, the impact of U.S. Treasury actions on Bitcoin prices and market volatility in August 2025 has become a topic of intense interest. John Kojo Kumi, a cryptocurrency researcher and writer specialising in emerging startups, tokenomics, and market dynamics within the blockchain ecosystem, provides insights into this dynamic landscape.
The "Big Beautiful Act," expected to result in a liquidity contraction, has raised questions about its potential impact on the Treasury General Account and, in turn, the cryptocurrency market. However, the broader picture is more complex, shaped by several significant regulatory and policy developments earlier in the year.
One such development was the establishment of the Strategic Bitcoin Reserve and Digital Asset Stockpile by the U.S. executive branch in March 2025, signalling official recognition of Bitcoin as a legitimate store of value and a strategic asset. This move likely bolstered confidence among institutional investors and corporate treasury holders, potentially supporting Bitcoin price gains amid increased adoption narratives.
The U.S. also repealed outdated Treasury policies regarding cryptocurrencies, creating a less restrictive environment for crypto businesses and banks. This deregulatory effort, combined with new pro-crypto laws in states like Wyoming and Texas, has contributed to a more stable crypto market.
However, new accounting standards have introduced a layer of volatility. Effective January 2025, ASU 2023-08 requires firms to report crypto assets at fair value with unrealized gains and losses recognised in net income. This rule has increased earnings volatility for companies holding Bitcoin on their balance sheets, as price swings directly impact reported earnings.
Legal scrutiny has also intensified, especially for firms that misrepresent Bitcoin's price stability or fail to adhere to accounting and safeguarding standards. The increased disclosure requirements and potential lawsuits add a layer of risk that might translate into heightened short-term market volatility.
Regulatory shifts in derivatives and custody have also had an impact. The Commodity Futures Trading Commission (CFTC) and Office of the Comptroller of the Currency (OCC) have eased regulations on digital asset derivatives and custody, with the OCC's Interpretive Letter 1183 allowing banks to custody digital assets. This regulatory clarity encourages broader institutional participation, which can both stabilise the market by bringing in liquidity and increase volatility if speculative derivatives trading expands.
In summary, U.S. Treasury and federal regulatory actions in 2025 have contributed to a mixed impact on Bitcoin prices and crypto market volatility in August 2025. Official recognition and deregulation support price stability and growth, while accounting rules and legal risks amplify earnings-related volatility and market uncertainty. Institutional participation facilitated by custody and derivatives regulation further increases trading volume and price swings, shaping a dynamic but maturing crypto market environment.
As of July 3, 2025, Bitcoin is priced at $109,362.67, with a market cap of $2.17 trillion and 64.34% market dominance. Arthur Hayes, a cryptocurrency market voice, warns of a potential short-term Bitcoin dip due to the $486 billion U.S. liquidity contraction, with the price potentially moving to the $90,000-$95,000 range.
Investors are closely monitoring these developments for clearer signals in both traditional and crypto financial sectors. The global cryptocurrency space remains vigilant amid anticipated Federal Reserve decisions, while traders are betting on two Federal Reserve rate cuts by 2025.
Sources: [1] CoinDesk, 2025 [2] Coindesk Research, 2025 [3] CoinMarketCap, 2025 [4] Cointelegraph, 2025
- John Kojo Kumi, in his analysis of the cryptocurrency market in August 2025, notes the impact of the U.S. Treasury's "Big Beautiful Act" on the liquidity contraction and its potential influence on cryptocurrency prices, particularly altcoins.
- The role of tokenomics in understanding the dynamics of the cryptocurrency market becomes increasingly important as regulatory developments, such as the repeal of outdated Treasury policies and the establishment of the Strategic Bitcoin Reserve, shape the broader cryptocurrency landscape.
- The report from Coindesk Research in 2025 highlights the significance of investing in cryptocurrencies, where traders not only focus on traditional finance sectors but also pay close attention to crypto news and blockchain-related developments, considering factors like new accounting standards, legal scrutiny, and regulatory shifts in derivatives and custody.
