Hayes’ logic chain begins with an observation on political incentives and the arithmetic of public finance. Governments can fund spending with “savings or debt,” and in his view elected officials “will always favor borrowing from the future to get re-elected in the present.” For the United States, he contends that the trajectory is already set: “Here are the estimates from the TBTF banksters, and a few US government agencies. As you can see, the estimates are for ~$2 trillion deficits funded by ~$2 trillion of borrowing.” In his model, once one accepts that “Yearly Federal Deficit = Yearly Treasury Debt Issuance Amount,” the next critical question is who actually buys that debt, and on what financing.
He dismisses foreign central banks as dependable marginal buyers after the US sanctioned and immobilized Russian reserves in 2022. “If Pax Americana is willing to steal Russia’s money… then no foreign owner of treasuries is ever safe,” he writes, concluding reserve managers “would rather buy gold than treasuries.” He likewise downplays the capacity of the US household sector given that “the 2024 personal savings rate was 4.6%” while “the US federal deficit was 6% of GDP,” and he argues the largest US money-center banks have increased their Treasury holdings by only “~$300 billion” in fiscal 2025 against issuance of “$1,992 billion,” making them meaningful but not decisive.
Instead, Hayes positions relative-value hedge funds—particularly those booking positions via Cayman vehicles—as the marginal, price-setting bid for US duration. Citing a recent Federal Reserve study, he quotes: “Cayman Islands hedge funds purchased, on net, $1.2 trillion of Treasury securities… [between] January 2022 and December 2024… [and] absorbed 37% of net issuance of notes and bonds.” The trade architecture is straightforward: “Buy a cash treasury debt security vs. sell the corresponding treasury futures contract,” then lever the tiny basis through repo funding. Because the edge is “measured in basis points,” the trade only works if leverage is cheap and predictable every day.
That funnel leads directly to the SRF. Hayes lays out the Fed’s short-rate corridor—“Upper and Lower Fed Funds; currently these equal 4.00% and 3.75% respectively”—and the policy plumbing that keeps market rates inside it: the Reverse Repo Facility (RRP) at the lower bound for money-market funds (MMFs) and banks, interest on reserve balances (IORB) for banks in the middle, and the SRF at the upper bound as the emergency spigot.
Lower Fed Funds = RRP < IORB < SRF = Upper Fed Funds,” he summarizes, adding that the target, SOFR, normally oscillates inside the band. Stress occurs “when SOFR trades above the Upper Fed Funds,” which he calls “a problem” because “the filthy fiat financial system shuts down” once participants can’t roll overnight leverage at a stable rate.
Set against that diminished supply of cash is relentless demand for repo financing from RV funds, whose “marginal” Treasury purchases must be levered. If SOFR threatens to pierce the ceiling and repo becomes unreliable, the Fed’s SRF must backstop the system to prevent a funding accident. “Because a similar situation occurred in 2019, the Fed created the SRF,” Hayes writes. “The Fed can supply an infinite amount of cash using its printing press at SRF as long as one provides an acceptable form of collateral.” His conclusion is blunt: “If the SRF balances are above zero, then we know the Fed is cashing the checks of the politicians using printed money.”
Hayes labels this dynamic “Stealth QE.” He argues the optics of outright balance-sheet expansion via asset purchases are now politically toxic—“QE is a dirty word… QE = money printing = inflation”—so the central bank will prefer to meet marginal dollar demand via SRF lending rather than by visibly creating excess reserves.
The result is functionally similar from a liquidity standpoint, in his view: repo credit distributed by the Fed against Treasuries still increases spendable dollars in the system to finance government borrowing. “This will buy some time, but eventually the exponential expansion of treasury debt issuance will force the repeated use of the SRF,” he writes. “Stealth QE will begin shortly. I don’t know when it will begin. But… the SRF balance must grow as the lender of last resort. As SRF balances grow, the amount of fiat dollars in the world expands as well. This phenomenon will reignite the Bitcoin bull market.”
He also sketches a near-term tactical backdrop that helps explain recent market tone across crypto. While auctions are pulling cash into the Treasury General Account, he notes, fiscal spending has been temporarily impeded by the government shutdown, producing a net drain in private-sector liquidity.
Hayes’ rhetoric remains intentionally sharp. He describes Treasuries as “dog shit” at prevailing real yields, calls the buy-side “debt shit eaters,” and opens with a hymn to Bitcoin’s monetary properties—“Praise be to Lord Satoshi that time and compounding interest exist regardless of who you are.” The provocation serves the point: if the marginal financing of US deficits increasingly relies on opaque backstops rather than transparent reserve creation, then crypto’s native, non-sovereign liquidity cycles will key off the same hidden plumbing. He distills the investment upshot in a single sentence: “Treasury Debt Amount Issued = Increase in Supply of Dollars.”
The essay is not a calendar call. Hayes refuses to timestamp the inflection—“I don’t know when it will begin”—and he warns that “between now and when stealth QE begins, one has to husband capital. Expect a choppy market,” especially with shutdown dynamics distorting flows.
At press time, the total crypto market cap was at $3.41 trillion.
