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- [00:00]
A
If I had $1 to invest right now, would I be putting it into bitcoin? No, I would wait. I think that the longer that this conflict goes on, the higher the likelihood that the Fed has to print money to support the American war machine. And that's when I'm going to buy Bitcoin, when the central banks start printing money.
- [00:22]
B
Hey everyone, welcome back to the show. Joining me this week is the one and only Arthur Hayes. He is the Chief Investment Officer at Maelstrom and obviously an og. A lot of people know him, but this the first time he's coming on Coinstory. So Arthur, thanks so much for joining me.
- [00:36]
A
Thanks for having me.
- [00:38]
B
I feel like we have a lot to talk about, but where I kind of want to start is just share your backstory because the folks in my audience have not heard from you before. You've got a fascinating backstory. I think. I read that you grew up in Michigan, then you ended up working the financial world. You started Bitmex, you were early to Bitcoin, but you've gone on a fascinating journey. So share what you want about it.
- [00:59]
A
Sure. I was born in Buffalo, New York and also I spent a lot of time growing up in Detroit, Michigan and I decided to go to university at University of Pennsylvania, the undergraduate business school at Wharton in 2004-2008 and I caught the bug to want to go to China and I studied Chinese in school as well as business and got the awesome opportunity in 2006 to go out to Hong Kong as a study abroad student. I loved it so much that I got a summer internship there at Deutsche bank in Hong Kong and finally was able to get a full time job in Hong Kong in 2008 and moved out to Asia where I haven't left. So I've spent half of my life between Hong Kong, Singapore and other places in Asia. Never worked in the United States. I don't really spend much time there even though I was born there. My Chinese sucks right now because unfortunately they use it too much. But it was great to at least try to learn some of it. And I worked in the financial services industry for 5 years, 3 years at Deutsche Bank. I was the head exchange traded fund market maker. So obviously everybody in your audience probably is very familiar with ETFs. When I got into the banking industry it was a new thing for Asia and I was the market maker for the Deutsche Bank X tracker line in Hong Kong and Singapore. And then I left Deutsche and went to Citi, did the same job there and then looking back in hindsight, the best thing that ever happened to me, I got fired in 2013 from Citibank. And I was like, okay, what do I want to do next? And I think at the time I was very disillusioned with mainstream finance. Obviously after 2008, people weren't making the same kind of money that they were back when I was in university. And so I thought, well, I don't see this industry having a secular amazing future, at least for me and what I'm doing. So let me try to do something different. And I came across a post on zero hedge about bitcoin. I was like, okay, I got a lot of time in my hand. Let me figure this bitcoin thing out. I read the white paper. I was super into the philosophy behind it. Obviously, I don't have a tech background. I'm a trader. And I was like, okay, well, how do I trade this bitcoin thing? And I went on all the forums and researched every single exchange that was out there at the time. How do you go long, how do you go short? Are there any derivatives? And I found this small derivatives exchange called ICBIT. It was run by two Russian guys in the Caribbean back in 2013. And there's an amazing arbitrage opportunity where you could sell one of their futures contracts. Buy bitcoin spot. And your paranoid term was like 200%. Oh, great. I did this. This is what I used to do at work all day long for like two basis points, but now I can do it for, you know, a lot more. And so I went on mount gox. I bought my first bitcoin, I sold some futures contracts, and then I look, check my spreadsheet a month later, and I made exactly the amount of bitcoin that I thought I was going to make. I was like, wow, this is really cool. And so I, I started just doing that for a few months. And then in the fall, when the whole debacle of mt Gock started where you couldn't withdraw your dollars, like I tried to withdraw some dollars in my bank account and it was taking weeks and weeks and weeks. I started going on the forums and people were talking about all the issues that, that they were having, and I was like, oh, fuck. I think that they actually might have a real issue safely at the time. You could withdraw as much bitcoin as you want from mtgox. And back in the fall of 2013, the premium for bitcoin in china was skyrocketing. So it was like 40, 50, 60% premium trading in China. So they're okay, let me buy Bitcoin on empty gox for these dollars that I can't withdraw, and then I'm going to send them to a Chinese exchange, sell them for yuan, get on the bus, go to China, open a bank account, withdraw my yuan, get back on the bus, go back to Hong Kong. And I did that over and over and over again to arbitrage the difference between bitcoin in China and in Hong Kong until we even collapsed. I made a bit of money doing that. And then by the end of 2013, I was like, okay, well, as a trader you recognize, number one, you're not that smart. Number two, it's very hard to make money in trading over a long period of time. And if me with no technical skills, I'm able to make this kind of money, this isn't going to last. So how do I create something that's a little bit longer lasting to stay in the crypto game? And so I thought, well, I know how to do derivatives. I think I can do a better job than these Russian dudes. So let me try to build my own bitcoin derivatives exchange. And I went around my network in Hong Kong because I have no, again, no technical skills, no computer science skills. And I said, okay, well, I don't know how to build anything related to tech, so let me go and find some people who can help me. And I was able to find my two co founders, Ben Dilo and Sam Reed. And I pitched them on, hey, let's build the derivatives exchange for Bitcoin. Let's not try to do spot. There's like so many different spot exchanges at the time. And 2014, we started building Bitmax within a year we had launched our first retrieves contract in November of 2014. And then obviously the thing that we're most known for is the invention of the perpetual swap in May of 2016 when we launched that product. And as I'm sure most of your users know, and maybe they love or hate them, I don't know. It's the most widely treated crypto products, financial products ever. And so, you know, we made a bunch of money. We were number one for a bit. Then Binance took over in 2020 and you know, subsequent to after Covid, I sort of transitioned into running my own family office where we do early stage crypto investing. I do a bit of directional trading. And now we're launching a private equity vehicle to go and buy crypto companies and improve their operations.
- [07:00]
B
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- [09:09]
A
I mean I really love the space, I love the people. It's one of the most interesting individuals I've ever met in my entire life and I might be bullish or bearish on bitcoin at a particular moment. But I think that the need for stateless money is stronger now than it was in 2009 when the Genesis block launched. And so I'm really excited to just be in this journey. Whether it's bitcoin or some other shitcoins that we're involved in, I love it. And so yeah, I might be bearish a little bit on bitcoin or some other asset for a particular period of time, but I'm structurally very, very long Bitcoin and other coins in the space and you know, apart from the other stuff they do, this is what I spend the most of my sort of like non fitness related activities doing in terms of a professional career is crypto stuff.
- [09:59]
B
So a lot of the folks who watch my show, they've been confused and disappointed by the last bull market cycle because they didn't see bitcoin reach the heights that they thought it would. And then we've had folks on the show like Lyn Alden saying that retail really didn't participate. It's mainly been the institutions and there are charts by companies like river showing that know increasingly it's moving away from the individuals towards the institutional hands. Can you share your take on that?
- [10:28]
A
I think that some folks in the industry have lost sight of like why we're here in terms of like we're not here to ask permission from large financial institutions to like exist. Bitcoin got from 0 to whatever, 66,000, whatever the price is today, with no government support, unclear regulations, hostile banking infrastructure and regulators. So why are we bending over backwards to try to gain acceptance from these folks who don't have our best interests at heart? I think we should continue to nurture the talent that wants to develop a new financial system for a new era in human civilization. Not just to shoe ourselves into, oh, how do we get into retirement flows or the next ETF or the next iteration of a digital asset treasury cup. I mean, I'm not saying they shouldn't exist as owners of crypto, but we shouldn't tailor the ecosystem and our desires to what helps them. We should tailor it to what makes this a transformational piece of technology. Because if we do the former, then we're just another financial instrument. And why should I own that? I can just go on my, my brokerage account and just buy another stock. It's way easier in some respects it's safer. Why would I deal with this crypto thing if all it is is just, you know, another FinTech Trad5 thing.
- [11:52]
B
Well, there's been a lot of talk on X lately about the idea of price suppression manipulation by some of these institutions. Obviously Jane street recently hit headlines. I mean, you have so much experience with these, you know, derivatives vehicles and with trading firms and the tradfi world. So like, do you agree with those concerns and theories?
- [12:12]
A
No, I mean, I think a lot of this is somebody goes on X and they say, oh, I lost money, it must be somebody else's fault. That's usually the mark of a very bad trader. It's like, oh, I made this trade, it didn't work out. I saw some headline that somebody claimed that this firm was doing something fishy, therefore that's the reason why I lost money. No, you're just a bad trader or your time horizon was wrong or your setup was wrong, or there's so many other things. So I don't think that there's anything nefarious of like some like evil conspiracy of Jane street and other market makers to like try to manipulate prices lowered. There's a market structure and there's different ways in which these firms play a part in that. Obviously derivative flows are very important in terms of short term price movements. But again, if you are not a professional trader, crypto trade, I mean like you need to be on your phone 24 7, you have alerts, you know, if it's 2 in the morning, wherever you are and something happens, then your phone rings, you got to get up and you got to trade. If that's not what you're set out to do. If you're just a casual, I want to get off work and like do some trading, like don't trade with leverage in crypto. Don't have short term time horizons because you're just going to get shaken out because you're not paying attention to what's actually happening. You just want to buy some Bitcoin or some other shitcoin and hold it for a long period of time, none of this matters.
- [13:27]
B
What do you think is holding Bitcoin back right now when the debasement trade is being recognized more? And it seems like everything's going into a bear market against gold and we hoped that Bitcoin wouldn't be one of those assets, but it really has been.
- [13:41]
A
I mean my theory is that Bitcoin is a liquidity alarm and there's a massive deflationary time ticking bomb under at least the United States in particular just because of how flexible the labor market is based on AI disruption and Bitcoin is along with some Other technology related stocks is giving a forecast of there is a massive amount of credit destruction that's going to happen in a highly leveraged rational reserve banking system if the highest wage earners who now want new a small percentage of the highest wage earners don't have a job anymore because they got fired for cost cutting reasons because AI could do whatever they were doing, better, faster, cheaper. So I think that's what Bitcoin is telling us. There has not been enough dollar liquidity created against all the other uses for liquidity, especially when you talk about Capex for hyperscalers. And that's why Bitcoin has underperformed over the last call it six to nine months. Like if you look at, you know, Nasdaq's pretty flat, Bitcoin is obviously down 50%. Gold continues to rise. I don't think gold is on a debasement trade. It's more because if you're not a sovereign nation and you hold dollar assets, you've been repeatedly reminded that those are not your assets. You exist at the behest of Scott Besson or Whoever is the U.S. treasury Secretary. And they're number one going to inflate away your debt by issuing a lot of bonds or they're going to steal your money by basically sanctioning you. And so why would you want to own that asset with your country's savings? You should own gold. And that's why central banks have been buying gold in an increasing amount since 2008 and accelerating in 2022 when the US and the EU stole Russia's money.
- [15:18]
B
Well, back to your points about AI. You put out this great article related to this deflationary impulse and the white coll jobs that are at risk and also how private credit, you know, credit in general is going to shrink at some point and that'll be the catalyst for the Fed having to step in and print really big. Right, and that's going to shoot Bitcoin up. Do you see that as something that's imminent or do you agree with maybe the Lyn Alden where they say it's going to be kind of a slog? Like it's going to be slow and grinding and a gradual print, but eventually it'll kind of catch up and Bitcoin will have the push that it needs to be.
- [15:53]
A
So I don't know. I think it's going to happen faster than people think just because of the exponential nature of how fast AI is improving. If you take a look at the 2008 subprime situation, it kind of metastasized itself about seven years after China joined the WTO. Right, and what did that do? It basically eviscerated like 35% of the manufacturing workforce in the U.S. these people are now poor. They're taking out subprime mortgages. At some point they can't service these debt. The deliberacy rate only rose, I don't know, to high single digits. Nothing insane. But the leverage kicked in and then essentially you had a financial crisis. AI is advancing much faster than you can fire somebody on a production line. You saw the block fired 40% of its workforce overnight. Other companies, at least in the United States are talking about this because they have very flexible labor agreements at will, employment, such and such. And so you're able to essentially say, oh, there's these AI efficiencies. Okay, I'll just cut however, 10, 20, 30% of my workforce. And so my point is not that 100% of white collar jobs are going to end. It only takes 10 to 20% and then the leverage in the banking system will do the rest. And it's like a Minsky moment. At some point the market goes, oh, this is worth zero. Maybe it's not in three years time, but I believe it's worth zero. The unemployment rate ticked up a few percentage points. There's been all this noise about this AI disruption and then all these stories that they've been reading over the past months or years crystallized in their mind, oh shit, I get to dump everything. There's no value in any of this stuff. Dump the banking stocks, dump the private credit. And that's when you get these regional banks trading down 60, 70% in a few trading sessions. And then depositors fleeing to the government guaranteed banks like JP Morgan and Citibank and then the Fed stepping in. And so while yes, maybe Lynn, almost correct, the effects might take two to three years to play out, to lose 10 to 20%. The recognition of the market, of that forward is going to be almost immediate. We don't know when that's going to happen. It's just going to be some sort of like collective agreement. Oh, okay, AI disruptions here. All these people are getting fired. Why do I own these financial stocks?
- [18:04]
B
Do you have concerns about sort of the social implications of all this? Because I know you're in Singapore, but here in the US things have got more and more divided. There's so much civil unrest, everyone has turned tribal about their politics. And I think this is only going to intensify because as more people get laid Off. It seems like the answer to some folks is, you know, electing someone who's going to hand them the most free things or at least promise to. And there's just been such, like a core frustration that I do think has ripple effects. And a lot of people don't understand that they have to, you know, own and acquire hard assets like bitcoin.
- [18:39]
A
Yeah. So every country is different in terms of their social contract between labor and capital. And the US Has a very thin one. Capital reigns supreme, obviously in the United States, different in the rest of the world, especially where I live. And so, yes, I think it's going to be a very divisive time because you're going to have a lot of people who are, again, used to think themselves very wealthy, now they don't have a job. All the people they look down upon for taking a government hand up, now they're one of them. And so what does that do to somebody's ego? How do they represent themselves politically or physically? Go get a gun, go on the streets. I don't want that data center opening up. I don't want Elon Musk and Sam Altman and Mark Zuckerberg taking these above normal profits because they eviscerated what I thought was my ticket to prosperity in America. And so I don't know how that's going to play out, but it's not going to be a linear progression and it's going, going to be very divisive just because that is the social contract in America and people are going to have to rewrite it. However, whatever that is, I don't know. But it's not going to be pretty.
- [19:45]
B
Well, that cohort, there's a lot of frustration that they, like, can't buy a house. Right. And they don't have access to the capital and the wealth creation that has happened over the past few decades. But I feel like bitcoin is sort of a glaring solution because you can start to accumulate it little by little, and yet so many people are still turning away from it. Like, I'll give you an example. I recently saw a clip from Tuck, Tucker Carlson's show, where he brought on a female guest who was talking about CBDCs and programmable money and the danger of that. And I wrote just like a simple comment, you know, bitcoin's the solution. That was it. I kind of thought nothing of it. I got alert after alert after alert of people responding to it, just trashing bitcoin, talking about how Epstein created it. It's a tool of the Government, the CIA is behind it all. The energy will go down, the grid will go down, you can't use it. And I'm just, I'm sometimes shocked by. We've come so far and yet people are still against Bitcoin. And it just surprises me sometimes.
- [20:44]
A
I mean, buying a little bit of bitcoin isn't really going to solve your problems. You're making $250,000 and you lose your job and you can't afford your $750,000 mortgage and your $2,000 a month credit card bill. It's great for people who've been accumulating it for a very long time. And yes, the price, you know, I think will, will go up in a secular fashion, but it's not really going to solve the problems of the person who thought they were rich and now they're not once they see, you know, how much money is going out the door every month to pay for this lifestyle that they thought that they needed. So I think it's more of a. If you, you know, have spare capital and you have the ability to recognize that this is a possible solution, it's a great time to invest. If you recognize you might be in this cohort that is going to find yourself displaced. Well, what does retraining mean in the AI age? I have no idea. And you know, it's time for people to sort of think about like, do I need that expensive consumer gadget? Do I need to be in, you know, that neighborhood in this city paying that kind of money for rent or mortgage? Right. He who sells first sells best. Who's going to buy all these houses? When people say, oh, I need to downsize, maybe that was too much for me. Now I was making 250, now I'm making 75. Right. So again, I think these are all questions that people need to ask themselves. And looking at their own financial situation and buying $10,000 of Bitcoin ain't gonna solve that issue for you, unfortunately.
- [22:07]
B
I mean, that's true. But also, as far as like possible solutions or life rafts, don't you feel like there aren't that many? I mean, if you are living paycheck to paycheck, what are your options when you are starting to feel like your job is no longer secure? You don't really own anything. You could be displaced. The future is looking really uncertain. Like maybe you have dependence. Like, I mean, what solutions exist out there?
- [22:36]
A
I mean, I've never been in that situation. So this is me, you know, speaking out of my ass. But again, you have to look at your cost base and try to reduce as much as you can, right? What is it you don't need? You know you were shopping on Amazon, now you're at everyday low prices buddy. So what's happening to your financial situation and what can you change as fast as you can change it so that you know if the eventual hammer comes down, you're in a better place Position to ride that out and find yourself something new to do.
- [23:04]
B
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- [23:19]
A
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- [23:25]
B
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- [26:13]
A
I think you have to tailor your expectations. The market is not, I don't care what you buy, doesn't matter if it's bitcoin, stocks, real estate, whatever. The market is not supposed to give you an above average return because you bought on today and in 3 months time you need to have made 5x of your money because of whatever reason. The market's job is not to make you money. The market's job to take your money. And so like if you have a time horizon that's too short and expectations that are too high, number one, you reach and use leverage because oh okay, I need to add a little bit of juice to make this money faster because I'm supposed to be in this transformational asset. I saw these people posting on TikTok that they've got all this nice money because they bought bitcoin. But how did they feel in 2013 when Bitcoin went from 250 to 70? How did they feel in 2014 when Bitcoin went from 1300 to 135 by 2015? Right. So everyone looks at oh these guys and girls make all this money back in the day. And to realize bitcoin was like Three or four times more volatile in these other periods than it is today. And so for you to say, oh, if I just put in $10,000 of Bitcoin at $100, I would have so much money. No you wouldn't. You would have sold it when it went to 200 or you would have sold it when it went to 99 because it didn't achieve your short term expectations for the price performance. And so again, bitcoin is not going to save your financial house immediately. It might do something over time, you know, in the same way that people say, oh, stocks for the long run, absolutely. Compound interest rate and time are great, most powerful things in the universe when you talk about capital accumulation. But the key thing is time, right? Doing it over and over again over a long period of time helps you build wealth in an exponential fashion. But you can't expect the market and whatever asset you're trading to deliver you life changing returns in six months. It just isn't going to happen. And yes, you might see somebody who's got completely lucky, but I bet you they'll lose all their money in the next six months because they're going to continue to believe this fallacy that they can make that sort of money by doing whatever reckless trading strategy they were doing.
- [28:20]
B
I think that's very well said and a message that a lot of people need to hear. What is adoption and just investing mentality like where you live and maybe in China as well? Because I've heard mixed things. Like sometimes I hear, oh, there's actually a lot of bitcoin mining and adoption in China. And other times I'm like, I hear no because it's banned or whatever.
- [28:39]
A
So I mean the government and local governments still mine bitcoin. I think if you look at the IP logs, you can see something like 20 or 30% of the hash rate comes from China. And basically the issue with mining and why they shut down most of the non government affiliated miners in China was energy usage. Right? Obviously. And this is very acute now with the us, Israel and Iran war. Right. China does not want to be importing oil and other sort of hydrocarbons so that people buying bitcoin when they should be doing other things in the economy. If you have this renewable energy resource or dirty coal, you don't want that being used to mine Bitcoin, make EVs, make batteries, make human robots, make these things that the Chinese Communist Party thinks are going to be better for the long term growth of China. And that's why they pushed out bitcoin mining because it uses so much energy in a way that they didn't think is furthering their national goals. Now, that being said, there's a lot of stranded energy assets within China and a lot of smaller local governments who are able to basically exist under the radar from the central government. And they still mine bitcoin and that's why there's large miners who are still residing in China and they're usually local government or central government affiliated. So, yes, China bitcoin mining is like kind of banned, but not really.
- [30:03]
B
Yeah, that's what I thought. I mean, I would assume that China has actually amassed quite a bit of bitcoin at the government level. And I personally believe that's one of the reasons why the US is not releasing information on how much bitcoin we actually have, you know, the results of whatever audit was supposed to be conducted. And I think it might have something to do with our adversarial relationship with China and the potential that what if. What if they do have more than us?
- [30:30]
A
Maybe. I don't know. I think the whole focusing on how much bitcoin a sovereign nation holds is kind of irrelevant because even if China supposedly has 200,000 Bitcoin, I don't know how many billions of dollars that worth gold market as well, way bigger, even though it's still a small market in comparison to dollar equities or real estate. And so I don't think anyone in the US administration or in China is losing sleepover how much bitcoin they have. It just doesn't matter in terms of the grand scheme of things and how much other stuff that they have that could be counted as national wealth?
- [31:09]
B
Yeah. So do you disagree with folks like Max Kaiser that say that there will be kind of like a hash war, like sovereigns competing over who can mine and accumulate the most bitcoin?
- [31:21]
A
No, I don't think so. I don't think that sovereign nations care that much about bitcoin, even in the US I think it's an electricity, it's a tool to get people to come to the ballot box. And I think people have seen the results of that in terms of like the types of policies that the Trump administration said they would do and what's actually been enacted, whether you agree with them or not, tells me that it's. It's a great electoral. I'm going to do this for this constituency. Please show up at the ballot box and vote for me. Obviously, in China, it's not that sort of participatory system. And like they don't care about bitcoin. Yes, they care about the internationalization of the yuan and how it's being used for trade flows and whatnot. But like, what people do with bitcoin is kind of irrelevant.
- [32:05]
B
So how do you think bitcoin will look in say, the next five to 10 years? Because going back to your earlier point about just how this is transformative as a technology so that we don't all have to be kind of enslaved by the traditional financial system and fiat. How do you see this all playing out in terms of adoption and growth? And obviously number go up helps.
- [32:27]
A
I mean, that's the thing. I think it matters. Number go up is the mimetic transmission mechanism of information about Bitcoin. What did I hear about bitcoin? Because the price went up in 2013 and somebody wrote an article about it, I read it and then I went down in the rabbit hole. So, okay, if the price goes from 66,000 to 500,000 in the next five years, there's going to be a whole new raft of people who get involved, people who re engage with the technology. And that's how we continue to get adoption. What is that based on? Liquidity? How many units of fiat are created? Whether it's dollars, euros, yen, yuan, whatever. The more that that happens, and I don't think that's going to stop. As Lynn Alvin says, nothing stops this train. The higher the price goes mathematically just because the denominator gets so, gets so large and so the volatility and the path dependency, who knows, bit go to 20,000 in the next because of the war. I don't know. But I think over time, just because governments are hardwired in a fraction of reserve banking system to print money because they have to, the price goes higher. Higher the price goes, more people get involved and that really drives adoption.
- [33:30]
B
Do you think we will see another cycle where retail, like, you know, enthusiasm returns in a way that we've only, we only really saw in previous cycles, like 2021. I remember going to my first conference and it was like crazy. I mean people were messaging left and right. It seemed like the main buyer was the mainstream retail world investor. And now it's just, it's shifted. It feels very much more driven by the institutions. And I'm curious, like, do you think there will be another boom that's really driven by the average person?
- [34:07]
A
Sure, because maybe it's not bitcoin, but there'll be some other crypto that goes up a lot, maybe a little bit more tethered to cultural artifacts like NFTs or whatever it is. Meme coins, right? People are very into meme coins. I know he lost a lot of money and it's kind of dead right now, but if you want to talk about where the energy was, it was meme coin trading in the last cycle. So there will be something else because again, I think that global central banks have to essentially print a bunch of money to make sure that people don't kill each other in the streets with this AI disruption. The only way, until we decide how do we share all this productivity wealth with everyone is to own these sorts of assets that will do well because people are printing money and there will be whatever the asset is that retail love. And yeah, people will be at the conferences, at the parties, and it'll be back.
- [34:55]
B
So do you think they'll have to print more than they did in response to Covid?
- [34:59]
A
Probably just because of the exponential nature, because not only do you have to print to solve today's problems, but you have to pay back the other debt as well. And so obviously, if you take a look at the amount of US Treasuries outstanding, which is a good chart, it's exponential. It's an exponential chart. And so we're just getting started. If you think about if AI is as good as they say it is, I don't know, then everybody loses their job, right? I don't think it's going to be that way, but that is sort of your North Star in terms of like, well, how bad would that be if everybody has now been replaced by a robot or Claudebot? How much money do they have to print? The banking system essentially is completely split, so they have to print everything. So again, I don't think this can happen, but it's just sort of a mental model of what could happen if AI is as good as they say it is.
- [35:48]
B
So if you were kind of starting over right now, if you were coming out of college, what would you do if your goal was to amass as much wealth as possible?
- [35:59]
A
Become a podcaster. Seriously? The only thing, I mean, yeah, computers can do a lot of things, but what's the input? The input is our conversation. The input is written word. We need new experiences, new human experiences to give to the AI, to then do predictive analysis, to do things for us. So those who are able to drive conversations, those who are able to produce new unique content, are going to be the most valuable people in this new post AI society. So whatever your niche is, get into that. And either it's Written word, it's singing, it's dancing, whatever it is, these are the things that are going to be insatiable amounts of content that an AI needs to consume to do its job. For us as a predictive analyzer, that's
- [36:48]
B
really fascinating because so many of the creative aspects are being replaced. And like, I see these videos that look so realistic where it's not, you know, it's some random person, but it looks like a woman or like, you know, beautiful woman in some part of the world. And it's like, what's real and what's not anymore. I think it's going to be hard to distinguish, don't you?
- [37:07]
A
Yeah, for sure. And obviously that's why people are buying World Coin and all these, like, you know, sovereign identities, like proof of human and all this sort of thing. There'll be some standard. I don't know what it is. This has been a problem that people have been working on for many, many years. But yeah, if you think about a prompt, when you prompt something, you say, make me something that looks like this, right? Because there's been a human or a band or somebody who's made something, and you want to emulate that. And so you want to be that person that the AI is emulating in whatever capacity that is.
- [37:36]
B
What are your favorite AI tools? Are you implementing them a lot in your work?
- [37:40]
A
I just started using Perplexity's computer. I think you have to upgrade to the max, like 200amonth or whatever it is. And it's great because it's almost like an orchestration layer. I know some of my friends have bought the Mac mini and put on their Claude bot and whatever and got super in the weeds. I don't have time for that and I'm not that interested. But Perplexity is able to do parallelization of tasks using some of these agents. And so I think there's going to be a world where people like me who don't want to get into the weeds of how do I orchestrate a team of agents to do a task? Well, I can pay, I don't know, Perplexity, whatever the parent company is called, you know, $200 a month and they can build a tool that can abstract it away and help me do that. I use it a lot for research. I use it a lot to make charts. So I think it's great.
- [38:32]
B
Did you see that note from one of the anthropic, I think, like research guys who quit and said that kind of humanity is going to hell in a handbasket. And he's going to live in London or something. I mean, do you. Do you have those concerns about AI and sort of the dark side that some doomers are predict?
- [38:49]
A
I mean, maybe, but life's too short to keep worried about that kind of stuff. Like, I don't know, it could be bad, it could be good. I've read a lot of sci fi. There's good, there's bad. Whatever happens, happens. And so I'm not going to worry about it.
- [39:03]
B
See, I love talking to OG bitcoiners because I feel like you guys are all in this Zen place in your life where you're like, bitcoin could do great. Bitcoin could totally go to zero. I'm good, I'm cool. And I know a lot of my audience feels a mixture of some financial security, some really great financial security. And then, I don't know, this really needs to work. Okay. I've got other investments and so it's kind of fun when I talk to folks like you because you take everything in stride in a way that's like, it's all going to work out. The world will keep turning. We'll figure it out. We'll find solutions. Technology is generally something that generates a lot of solutions. But I wanted to ask you just can you share more about your work? Your chief investment officer at Maelstrom. What are you doing? What's the company?
- [39:51]
A
So basically me and the head, I guess, partner, whatever you want to call him, hotshot, who used to work for me at Bitmex. We set this up in 2013 and basically I needed somebody to be a better investor than me. I am a very shitty early stage, especially because I get very impatient. I'm doing other things. I'd rather be skiing than reading 5,000 pitch decks. And so I was like, hey, Akshay, here's some money. Here's the goal. We want to be very liquid, right? So the very high liquidity preference, which is different than a lot of other funds, there's no LPs, so I don't have to worry about what anyone else thinks. What do we think is going to make money? How do we get our money back? Very technical in terms of our trading. And we want to be early in good projects. And so we set out first basically just writing small checks, 50, 100,000, $250,000 checks into early projects. We started at a great time in terms of investing in this season's best performing shitcoins. So talk about Etherfi. They were ethaking provider. They morphed into a NEO bank. We're an advisor to them. We're an advisor to Pendle, which has done very well. We're an advisor to Athena. I use my idea for the Athena protocol which was executed by Guy Young and the team third largest Stablecoin. And we basically have done very, very well in this vintage of the fund. And then we migrated into doing advisory. So this is why you see me on a lot of podcasts and speaking on stage about the different things that we're doing, the different tokens that we're excited about. And obviously we're paid in tokens for things that we believe could go up in value. We do that liquid trading. So I hired somebody that I used to work with at Bitmex and Deutsche bank and we do more directional and volatility trading in crypto. Long only, mostly. We don't really go short very much, very many things. And then now we've added on a private equity piece. We recognize that there's a lot of great companies in crypto that do things like data availability or API connectivity, like things that enable trading, things that people pay money, pay money for, pay a lot of money for. And these are very high profit margin companies, but they traded a discount because usually the founders are not in America and they're a crypto company and so they've been in the game for a while. They wanted to take some chips off the table. We want to come in, put in a bunch of money, buy the company, take out management, put in new operators, increase our price of equity, price of earnings multiple, and then either list it somewhere or sell it to another financial sponsor who wants a well run company that looks how they want it to look. And so we're raising money for that fund right now.
- [42:45]
B
Fascinating. And you have something in common with Ross Ulbricht, right? Didn't you get pardoned by President Trump? Do you have anything you can share about that?
- [42:52]
A
I mean like Houston Moyers got very, very lucky. It's very difficult to get a US Presidential pardon. Yeah, it's about all, nothing super sexy about it.
- [43:04]
B
Well, it's just so crazy to see how the industry has gotten attacked from some of these regulatory agencies and the AML KYC creating things like the privacy tools. I mean, do you expect that to continue with this friction between Bitcoin as a medium of exchange and as a true peer to peer protocol versus what it seems like a lot of people are scared of, which is the grow institutionalization, the like, you know, corporate capture that those two forces sort of working against Each other.
- [43:35]
A
Yeah. So obviously bitcoin is synonymous. And I think that yes, people are worried about oh the, the corporations are going to put in all these ridiculous KYC AML things and like take away the privacy of Bitcoin. The fear is right, the implementation is wrong. It's going to come from an AI tool that could de anonymize your transactions. That's, that's, that's the game. And it's not going to need some fancy new regulations. It's just going to be, oh, put this address and this person I suspect to be connected with it into some LLM and they spit out a high probability of who it could be. They can already do that. Maybe that's higher probability, but that's happening. This is why I'm very long zcash because it's a privacy focused Bitcoin essentially because that's the same code base as Bitcoin with zero knowledge proofs on top for this age of okay, I have this Bitcoin if I actually want it to be real electronic cash and completely anonymous. That's not what Bitcoin is for. I don't see the core developers ever putting in that sort of feature. That's what zcash is. And so if you're afraid of this future where essentially an AI paired with a big tech database paired with the amount of data that a government has on you, then yes, Bitcoin is not for you. There's something else I think in zcash, but there's other Monero and other privacy coins that are trying to attack the same problem.
- [44:56]
B
And you're not worried about Quantum?
- [44:59]
A
No, I mean I've talked to the Johnny Beer at Bitcoin Bitmex Research a bunch about this and there are already bitcoin improvement protocols to make addresses safe post Quantum. And if, you know, today, if you're really worried about about Quantum, I'm going to butcher this a bit because again, I'm not super in the weeds on it. The newest set of addresses, if you essentially send Bitcoin to that address and only use it once, you're not at risk if you have an address from 2009. Yeah, Quantum World, those could be. You could back out from public keys and transactions to private keys in this particular post Quantum future. So I don't think it's that big of a risk. People have been thinking about it. There are proposals that could essentially put Bitcoin post Quantum. And so I think it's a lot of fun. And we've had this post Quantum fud every few years about, oh, no, I'm not going to buy bitcoin because, you know, they're going to essentially be able to back up my private key from a public key from, from a public transaction. There are solutions out there. We'll see how long it takes to implement them. I'm not particularly worried about that.
- [46:10]
B
Yeah, well said. The last piece of FUD I want to ask you about is some folks anticipate another block size type war, but one that will be really at that institutional level about an upgrade where there's kind of like the blackrock chain and then there's. It forks and there's another chain. Like, do you, do you anticipate that that'll happen and how do you think that will play out?
- [46:34]
A
Well, if BlackRock was like 30% of the hash rate, sure. But BlackRock is just like the rest of us. They are a holder of bitcoin and they don't do anything because their job is an asset manager. Give me assets, I custody them, I charge you a fee. They are not in the game of mining and running nodes and doing all these things that you need to do to actually have a real voice in the crypto ecosystem. So there is not going to be a BlackRock coin unless Larry Fink is going to get into buying Asics and mining Bitcoin. So tell me about that future and then we can have a discussion about the BlackRock, Bitcoin, hard fork, whatever. Otherwise it's nonsense.
- [47:15]
B
All right, fair enough. Last question. Do you think the bottom is in?
- [47:22]
A
I don't know. I wrote a recent essay about sort of what's going on in the unfortunate war between us and Iran. And I think that, that there is a situation where the longer that this carries on, there could be a massive sell off in equities and bitcoin might fall a bit lower, might break 60,000, and that could be sort of a big cascading of liquidations down. So if I had $1 to invest right now, would I be putting it into bitcoin? No, I would wait. I think that the longer that this conflict goes on, the higher the likelihood that the Fed has to print money to support the American war machine. And that's when I'm going to buy bitcoin, when the central banks start printing money. I mean, we're starting to hear rhetoric that Trump says he might put boots on the ground. He's here for the long term, however long it takes, whatever that means. The more, you know, the longer this carries on, the Fed's gonna have to print because they that's what they do. They've done it for every other Middle east, major Middle Eastern conflict, at least in my lifetime. And so I think if you're saying, okay, war is good for bitcoin, what you're really saying is war means money printing. Money printing is good for bitcoin. And so wait for the money printing. Don't try to time it because you could get it wrong. You don't know. You're just reading the same propaganda mainstream media and they're going to tell you whatever the authorities want you to hear, which might not actually be what's actually going to happen in reality. So wait to see what they actually do rather than what they say.
- [48:49]
B
Yes, that is so true. I also don't think the bottom is in and I think we're due for a sell off in equities that we haven't seen. And generally bitcoin doesn't uncouple from them. It performs like a high beta tech stock and so it will sell off as well. But I see that as a huge opportunity. I don't think there are going to be many more years where you can buy sub 100,000 bitcoin. So I hope everyone embraces that. Arthur, it's been really great to speak with you. Thank you so much for taking the time to join the show. Any final thoughts?
- [49:19]
A
Be safe.
- [49:21]
B
We will be. Thank you so much and I'll be sure to link your work in the show notes. If anyone has questions, feel free to reach out to me. Thank you so much for watching And Arthur, great to see you. Hope to meet you in person soon. Thank you so much for checking out this episode of Coin Stories. Make sure you're subscribed to the show so you don't miss any new episodes. If you can, turn on those notifications and leave us a positive review, they really help the show grow organically with new listeners. We have a free weekly newsletter. You can sign up@thenewsblock.substack.com this show is for educational and entertainment purposes only. Nothing should constitute as financial investment advice and you should always do your own research. I'm always open to feedback and guest suggestions, so please feel free to reach my team@infoalkingbitcoin.com I'll see you next time.