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- [00:01]
Host
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- [00:56]
Arthur Hayes
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- [01:55]
Host
Arthur Hayes doesn't hold back. He has edgy global macroeconomic insights backed by facts and rational verb. He is the co founder of Bitmex where He invented the 100x leverage perpetual swap. He has the heart of a writer penning a popular Medium blog and founded his family office Maelstrom Capital. Please give us a warm welcome. Help us Giving a warm welcome to Arthur Hayes. Arthur, thanks for joining us.
- [02:24]
Arthur Hayes
Thanks for having me.
- [02:26]
Host
We're live streaming. It's Wednesday evening on the east coast of North America and you're mourning. You look like ripped wrapped, straight from the gym. We love it. Ready to roar. Let's dive into it. The latest news we have so far is that the US Federal Reserve maintained its benchmark interest rates 4 and a quarter to 4 and a half percent on Wednesday, its third consecutive meeting without any changes. It's navigating the Trump administration's global tariff war. The Fed noted heightened risks to both employment and inflation, citing uncertainty in the economic outlook amid persistent inflation above its 2% target. There is heightened sentiment, that is concerns of higher prices. But the real economic data is not there yet, according to Fed Chair Jerome Powell. Your reaction to the latest move?
- [03:21]
Arthur Hayes
Man doesn't matter. Who cares? Powell hasn't really mattered for many years. He didn't matter when Janet Yellen issued, you know, draw drew two and a half trillion dollars out of the reverse repo program using issuance of bills over bonds. He doesn't matter now that, you know, Secretary Besson has the ability to do treasury buybacks and all sorts of other shenanigans that the Treasury Department can do. It's irrelevant. The most important announcements come out of the treasury. The quarterly refunding announcement. Bessant gives more speeches than every Fed, you know, person combined. I think he just gave one at Milken. He was in the House I think yesterday. So listen to Besson. Ignore pal. He's irrelevant.
- [04:03]
Host
All right. Okay. So nevertheless there are port shipments. They're emptying. We know it's coming but the Fed seems to lag in their response. Powell isn't taking preemptive action. Do you think a supply shock is coming to the United States? And if so, do you think traders are or how are traders front running the real economic data?
- [04:25]
Arthur Hayes
I don't think it's entirely clear what's going to happen in terms of end demand for goods. Obviously we saw in the recent GDP print that a lot of people imported much a lot of stuff into the US Anticipating higher tariffs. Obviously that inventory needs to get worked down. We don't know if Trump and his team are going to further backtrack on their pledge to raise tariffs. They've already backtracked on using the 90 day pause. I think there is some news overnight about some they were going to revamp the chip AI chip restrictions on China. There's, you know, every single industry is lobbying Trump to get a carve out for automobiles, for semiconductors, for this, for that. And so I think it's unclear the actual net effect of these tariffs. And at the end of the day it might turn out that the actual trade deficit of the US doesn't actually change that much. Even after all the consternation over what these tariffs will be. And so I think it's too soon to tell whether or not a few weeks of shipping data is going to tell you what the future holds for end demand for global products within the United States.
- [05:33]
Host
Okay. So on Sunday, Trump said that he wouldn't try to fire Powell. He'll replace him in May of 2026 when his term ends. Trump said Powell is a total stiff. Powell said he went asked to talk to a President. The president asked to see the Fed chair. And while his term as Fed chair again does end in May of next year, his 14 year term as Fed chair, a Board of Governors member, extends until January of 2028. And he didn't say if he would leave his board position early. Meanwhile, he has adopted a more hawkish tone recently. People have been saying, you know, in April he didn't explicitly rule out rate hikes. And I liked your essay about the BBC, the big besant cuck. But is it possible that Jerome Powell is the BBC? I mean, he's sticking to his guns here. He's being pressured to lower rates. He's not doing it.
- [06:33]
Arthur Hayes
But it doesn't matter what the Fed does. And I think people need to. I gave a presentation, I took a 2049 in Dubai recently and I got on stage and I showed a chart, you know, back in third quarter of 2022, the Fed is raising rates, it's doing 75 basis points meeting inflation is surging. And Janet Yellen, the Treasury Secretary at the time, has to figure out a way to pump the markets to make sure that the Democrats stay in power. Doing her job, funding the government. And what did she do? She noticed that there was two and a half trillion dollars of excess money sitting in the Fed's reverse repo facility. And she engineered a policy whereby she issued more treasury bills and treasury bonds than the Treasury Department had been doing in the recent past, which siphoned money out of this facility that was sterilizing the Fed's balance. She injected it into the global money markets. It was re leveraged and a bull market in stocks, bonds, crypto gold, everything took off starting in the third quarter of 2022 in spite of hawkish Fed raising rates, maximum quantitative tightening, reducing their balance sheet. But the treasury said that we're going to induce the markets. Two and a half trillion dollars. Let's go. Right. So Powell didn't matter in 2022 under a Democratic regiment. He doesn't matter today under the Republican regime because again, Besson has tools like you talked about. In the recent Bloomberg interview, I think April 11th or 12th, he's got buybacks. And I spoke about, and I wrote about how treasury buybacks on a second order effect add liquidity to the global markets and Powell will sit back and say, oh, I'm going to look at data and maybe I raise rates, maybe I won't. Quantitative tightening will proceed or won't proceed. But he's a sideshow. The real show is at the Treasury Department. What traders should be really, really looking at is the quarterly refunding announcement and listening to what Bessant says when he gets on television and speaks at all these different conferences around the world. So ignore the Fed. It doesn't matter.
- [08:30]
Host
So you're talking about the, the treasury basis trade. What is the impact of that in terms of, would that cause massive inflation and eventually cause the dollar to weakened extraordinarily?
- [08:46]
Arthur Hayes
I'm not exactly sure whether it causes inflation or the dollar to weaken, honestly. I mean, given this is a crypto show, it doesn't really matter to us as crypto investors, what do we care about? Is there a bigger quantity of fiat dollars in the world than there were yesterday, today than yesterday or in the future versus yesterday? If so, then bitcoin and crypto will do well in the medium to long term. That's all we care about. So that's all I care about is what's the quantity of dollars? And so if you have a Treasury secretary engineering a, they're allowing the commercial banks to extend more leverage to hedge funds who then show up at a Treasury auction and buy the debt, the increased amount of debt that Dustin has to issue to fund the government, then we're going to get more dollars in the world and those dollars, some of those dollars will find its way to bitcoin and crypto and the price in fiat dollars will go up. And that's all we care about. So the dollar goes down, knows it goes up. I don't really care. Inflation don't really care. All I care about is what's the quantity of money out there. And then, you know, if you're an academic economist, you can sort of debate whether or not that's going to impact your particular favorite measure of inflation or whether you care about, you know, the dxy, which is basically the euro and the yen, or you care for the trade weighted dollar. Again, it doesn't matter. Bitcoin doesn't care. All we care about is whether is there more dollars in the system today than yesterday? That's all that matters.
- [10:05]
Host
Yeah. Oh, I guess it Matters in the sense that if there is a lot of money out there, what are people buying with it? Are they fleeing the dollar and going to bitcoin?
- [10:15]
Arthur Hayes
Is that, I mean, I don't. Bitcoin is still so small relative to the amount of dollars out there. I don't think it's, you can say, you know, the dollar dominance is declining because, you know, bitcoin's gone from zero to, you know, 2 trillion dollar market cap in the span of almost 15 years. Again, it's still too early to tell in that particular situation. So I know there's a lot of people saying, you know, bitcoin is a throwing in the dollar. I really don't think so, nor does it really even matter. All you care about is do your dollars buy more or less bitcoin today versus the day before? If we're talking about crypto, I think if you're getting into stocks and bonds and that's a lot more complicated. That's why I love bitcoin. It's just so simple. Is there more fiat in the world? Yes. Okay, then this asset will go up in price versus fiat. That's all that matters. And because it's such a small market right now, 2 trillion versus the hundreds of trillions of fiat financial assets out there in the world, bitcoin is going to outperform the debasement of fiat currencies for this particular period of time.
- [11:16]
Host
All right, and folks, we are live on YouTube and X and I see your questions coming and if you have questions, write them in. I'll see if I can get them in there. So in January, when bitcoin was making all time highs, your essay the Ugly predicted bitcoin would go down to $70,000 to $75,000 and then rise to 250 by the end of the year. Now you've bought the dip on bitcoin plus many quality shitcoins. You say you're also now on record saying bitcoin will hit the price of $1 million by the end of 2028. So walk me through that. And is this based on any technical analysis or purely on feelings on fundamentals?
- [11:59]
Arthur Hayes
Humans are rational beings. We like round numbers. So I like a million dollars just because. And it's this focal point for a lot of people to focus on. And so I think we get very, very close to a million dollars. We don't actually get there and then we collapse 80, 90% just like Bitcoin does. But at the end of the day, that's why I have that particular target in mind. I don't have any sort of like stock to flow or specific ti that gives me that number. It's just we're humans, we're dumb. Let's just pick a round number that's big kind of thing.
- [12:27]
Host
So tell me about the fundamentals that will get us there to, to 1 million in your review.
- [12:33]
Arthur Hayes
So, you know, first of all, the US Government has to fund itself, right? And so if you looked at the most recent quarterly refunding announcement, there's a table that the treasury produces that it sends to the, the treasury barring advisory committee the T back and it shows the largest portion of the federal budget and how much they increase or decrease over the past quarter year on year. So if you take a look at this chart, the largest increase both in a dollar notional and percentage terms was the interest that the treasury pays on its debt. Right. So the Debt's something like 36 trillion and change right now this is the largest expenditure change over the last quarter is the interest on the debt. So the debt is expanding exponentially. And Trump invested, even though they claim, not that they claim their goal is to get to a 3% federal deficit, which means that the bond market, the amount of bonds out there is still growing at an exponential rate. So the interest paid on this debt is going to keep growing exponentially. And you know, Trump did not campaign on I'm going to do austerity or default on the debt. So they have to fund it. You have Social Security and Medicare is going to increase. These are the health care costs in the United States is only going to increase because the population is getting older. I haven't looked at the data recently, but I think it should peak somewhere in the 2030-2035 years, like the peak years of spending for baby boomers who are going to basically draw down all these health care services being paid for by the government. And then the other last major piece of the government budget is defense spending. You know, Trump campaigned that he's going to come in and stop the Ukraine war. It's, you know, two, two and a half months in. And now Trump has just signed a, a materials, not materials, metals and mining deal with, you know, Zelensky saying, hey, we're going to keep supporting you, but we want to get paid back with the stuff underneath in the Ukrainian soil. So it doesn't sound like the war, it's going to be ending anytime soon. You have, you know, Israel just bombed the, the, you know, the Houthis, they're threatening to bomb Iran that conflict could kick off again, what's the US Going to do? It's going to support Israel and spend more money. You have Pakistan versus India. Who knows what that's going to happen and how the US Is going to intervene in that particular conflict. Because again, US wants manufacturing to shift from China to India. And so you can imagine that maybe, you know, there's clandestine support for the Indians or the Pakistanis. Who knows what, what the, the prerogatives of the CIA are on this particular conflict. But again, it's going to mean more spending. So there's just no way that the US Government is going to stop spending money. And because savings are so low, because all the stimulus checks from COVID have been spent, the only way to fund the deficit is to continue to borrow and to continue to increase the amount of dollars out there in the world. And so Biden's total deficit is about 7.1 trillion. We're already tracking higher than that in the first two or three months of the Trump administration. So Bitcoin went up 6x from 2022 to 2025. Trump is going to spend more money, have a bigger deficit than Biden. It's just math and the priorities of the administration. And so I can see Bitcoin going up 10x from here to a million dollars by 2028. Especially if we get a change in sort of the Fed and they come back on side and they do quantitative easing, they start cutting rates. And as you said, Powell stream ends in May 2026. You know, everyone believes that Kevin Warsh will be the next Fed governor. And he's gone on record basically saying the Fed is not independent, the Fed should do whatever the President and the politicians want, which means print the money, give more of it to the system to act as stimulus. And so I see an acceleration of money printing and fiscal debasement May 26 onwards. And that's probably when we get the sort of crazy runs in bitcoin and other sort of fixed supply assets.
- [16:34]
Host
Okay. I want to challenge you to reflect on how you could possibly be wrong. Is there such as a broad based downturn or, you know, based on supply shock, market panic or, I don't know, austerity measures, do you see an opposite case scenario there happening?
- [16:51]
Arthur Hayes
Sure, of course. If Trump or, you know, whatever politician, politics or politicians are in power are campaigning on, as you said, austerity, which is we're going to reduce the amount of credit, we're going to, you know, live within our means, we're going to experience a huge amount of pain to expunge all this bad credit from the system. Something akin to, you know, how the United States economy was run in sort of the 19th and early 20th century before the Federal Reserve came into being. If that were the message to the American people, then I would say there is a risk that million dollar Bitcoin is not going to happen. Because yes, it'd be very painful for the system, but things will the dollar be stronger, the debt pile might even be eliminated in its entirety. You could do a debt jubilee. There's lots of things that they could do. The question is whether you get elected after you do them. And I think most politicians believe that austerity is an unrelectable sort of policy and therefore they're not going to do it.
- [17:52]
Host
But ultimately, is that something that would be healthy for a country to just bite the bullet like that? Take the austerity, take the pain and lower the debt, the deficits, et cetera.
- [18:04]
Arthur Hayes
Depends on who you are, right? If you are a very wealthy financial asset holder and your assets are essentially debt based assets, then jubilee or sort of a debt cancellation is not really in your interest. If you are somebody who owes a lot of money or very poor and own financial assets, a debt jubilee, sort of a reset of the system is very healthy. So it really just depends on who the government is trying to serve. Again, but that's a normative discussion on morality and what a government should be doing. I'm just here to sling crypto.
- [18:38]
Host
All right. In past cycles, bitcoin was linked to the stock market. It's a risk asset. Recently we saw bitcoin decoupling from the stock market a bit. The markets went down during Trump's liberation Day of tariffs. Bitcoin managed to perform much better actually. And in April, we saw bitcoin and bond volatility sometimes go up in tandem. Do you think this is a sign that bitcoin becomes more and more of a tail risk hedge? An asset that is not just a safe haven, but an asset people will buy if the dollar goes bust, if everything just goes under, Bitcoin survives.
- [19:14]
Arthur Hayes
I think it all depends on your time horizon. So bitcoin has always been a safe haven asset, but maybe in particular snippets of time, it has had a very high correlation with big US Tech, which is the real. When people say the stock market, all they care about is the NASDAQ and the S&P 500. That's what we're talking about. So again, in a very short time horizon, yes, bitcoin has Created at a very high correlation with tech on an up and a downside. But Bitcoin from 2008 to 2000 and today is the best performing asset in all financial history. Again, it's not really correlated over a long enough time horizon with stocks. But yes, in a few month, few year time horizon, yes, you can be correlated with stocks and we saw that correlation break down when bitcoin front ran a change in policy. Right. The move index which you referred to, this is the bond volatility index. It hit 172 intraday. I think on April 9th, Jamie Dimon gets on CNBC and says in a very polite way that these tariffs are dumb. And Trump immediately changes tack. There's a 90 day pause, there's all these exemptions rolled out over the weekend. And then you know, you have bessing going on TV and Bloomberg basically saying I have treasury buybacks, don't worry about the market. And so that is to me, that was the local bottom and that was the time to buy.
- [20:29]
Host
All right. There is talk that while the Trump administration might try to weaken the US Dollar, what are your thoughts on that? And do you think we'll see the end of the US Dollar hegemony eventually?
- [20:45]
Arthur Hayes
So I think that they're not actively doing anything to weaken the dollar. But a weaker dollar is, you know, consequence of the policy of correcting the economic imbalances in the United States. So if the US runs a flat trade balance or manufacturing trade balance, that means that the capital balance also is flat, that surplus that was going into stocks and bonds and real estate in the United States. And so if all the foreigners don't own are not earning as many dollars and you know, they're actively probably reducing the amount of dollar assets, they have to bring those home to invest in their own home markets, then that's negative for the dollar. So it's just a consequence of the policy that they're pursuing Is, you know, best in or anyone in the treasury or Fed going out there and dumping dollars to, to smash the dollar lower? No, it's just a, it's a natural occurrence based on the shift in the flows of capital from, you know, selling things to Americans and buying stocks and bonds and not selling as many things to Americans and selling your stocks and bonds and bringing them home to your own domestic markets.
- [21:52]
Host
Do you believe in hyper bitcoinization, that all goods and services will eventually be priced in bitcoin, that eventually there will be an end of the US Dollar underpinning the global economy?
- [22:04]
Arthur Hayes
No. I mean, I think that there's still so much trade that happens in fiat currencies and domestic governments. It's not in their interest to price their either charge taxes or create legal tender laws for crypto or any other gold. Doesn't matter what it is. Right. The ability to issue your own fiat currency and never nominally default is a privilege that I don't think a government is ever going to give up. And I don't think the majority of the population particularly understands how money works. And so therefore it's never going to vote in. Okay, let's use Bitcoin or some other asset that we can't print as the legal tender. So I don't really believe in that. That doesn't necessarily mean that Bitcoin is not some ridiculously high value in fiat or can buy a lot of base energy. I just don't believe that governments are ever going to voluntarily give that right away and the people don't actually want it, are not demanding it.
- [22:58]
Host
So, Arthur, what is your crypto portfolio looking like right now? What's the composition here?
- [23:03]
Arthur Hayes
So probably about 60%, 60, 65% bitcoin, 20% eth and smattering of some liquid shitcoins and then maelstrom. We have a bunch of term sheet deals that we're waiting to TGE so we can realize those gains.
- [23:27]
Host
Okay, I'm getting a lot of questions about your top alts. What, what are they? Tell me a bit about them and why.
- [23:36]
Arthur Hayes
So obviously it's a T disclosure. Right. So number one, I'm an advisor in some of these projects. We're, we're an early investor in some of these projects. So I probably have to say my top two alts right now. And I think this is a new theme that I'm trying to popularize out there. We're, we're in fundamental season if you want to talk about shit coins. What does that mean? It means I've been doing this for over a decade and every single shitcoin cycle altcoin season since kind of Ethereum and the ICOS came on the scene in 2027, we've been sort of, I think, skirting around this issue of like, okay, we don't demand cash flows and users from projects, we demand nice white papers, great vision, a very charismatic founder or founding team that's going on socials and conferences and blah, blah, blah. And so at the end of the day, we haven't really rewarded a lot of projects that have given us users that spend real money on a, on a product or service and then this profit or revenue that accrues at the protocol level is handed back to us as token holders. But I think after doing this for two or three cycles and over a decade, people have gotten tired of all these coins that have no users, have no product market fit. Great marketing or have you just have product market fit but no revenue comes back to the token holder. And so I think this is why we have this dissolution about. There's been no altcoin season since this build market started in late 2022. We'd have a few standout successes in coins but you know, most of the alt market has gotten absolutely destroyed because they're not. Either they're not, they don't do anything or they don't give us the money back as token holders. So with that lens in mind, we're focusing on projects that have real users spending real money in a product and service. And that money doesn't just sit at the protocol, it comes back to us as token holders. So the two main projects that I'm super bullish on this cycle or I guess three, I'll give you three. So Pendle obviously they are the, you know, one of the highest TVL projects out there. They are pioneering yield trading strategies in and defi they're profitable. Some of that money goes back to the the Pendle token holders via staking and the project's been around for, you know, I think four or five years now. We love that project, we love etherfi. So if you saw me during Toca 2049 I had my Etherfi debit card. You also can use it on Apple Pay and they are now allowing you to take your staked eth, your stables and you can basically spend them at any merchant that accepts Visa anywhere across the world. And the fees are very reasonable versus some of the other crypto cards that have come into existence over the past 10 years since I've been been doing this and I like in it that Etherfy I believe is going to become like the Amex of crypto. So if you've got a bit of money in the fiat world using Amex, right, great customer service, great return policy, all those kind of things, but it's a bit expensive. And Amex is not trying to be the everyday every man and every woman card ethify the same thing. They're not trying to bank the unbanked or doing these sort of things. It's a card for crypto rich people to spend their money in sort of irl. And so I think that's going to be A very profitable segment. Now the, the founder and CEO of Etherfi says they want to do a billion dollars of top line revenue within the next, you know, two to five years. And I hope, I hope that happens, man. To reward us as supporters of etherfi, they are going to be taking some of that revenue and buying back their token and giving it to stakers. Right. So these are two of the top projects and obviously Athena, we're an advisor on that, they continue to be the top three stablecoin in terms of circulation partnerships with BlackRock A. They're really doing the thing, they're launching their own chain soon to, to really supercharge their stable coin and or synthetic dollar as Guy likes to refer to it and its usage Both in the D5 space and in the tradfi space, allowing everyone to access this latent yield that's being generated by speculators on various exchanges across our ecosystem. So those are my three top picks right now.
- [28:07]
Host
All right, Those are your quality coins.
- [28:09]
Arthur Hayes
Correct. Now I'll get, I will dig into the, the gutter, whatever the new narrative is, the shiny new thing that we're all going FOMO over, I will, you know, Maelstrom will be there trading it. Absolutely. But if you're talking about something that we're going to hold for, you know, a decent amount of time that I'm not worried about, you know, going to zero immediately, those are the things that we're holding.
- [28:33]
Host
What are your thoughts on meme coins? Like Trump coin, WLFI, Melania, etc.
- [28:41]
Arthur Hayes
I think meme coins are great. I think meme coins are democratizing the distribution of culture. Right. So right now what do we have? We have very siloed individuals and companies that are the gatekeepers to music, to film, to acting, all these sorts of things, right. They decide who's on screen, who gets shown to people. And there's 8 billion people in the world. A lot of creatives. How do you get noticed? So meme coins, I believe are some of the ways in which we're going to allow the long tail of talent to bubble up into the collective consciousness of this like digital world that we live in. Because, okay, it's trending. Who is this person or this entity? I'll figure it out. Because going up in value, they're also a great way to speculate because they actually, they're nothing. There's no real financial cash flows behind it. It's literally just is this popular. Does this meme slap, okay, cool, I'll trade it. So it's very Understandable for a lot of people to trade these things. And once they experience how to trade on a decentralized exchange or how to use one of these wallets, now they're in our system now, maybe they gravitate to another shitcoin or Bitcoin or what have you. So I think Meme coins are the gateway for a lot of people who otherwise wouldn't have dabbled in crypto, but because their favorite influencer or personality or, you know, meme is tradable, they're, they're going to use it. So, yeah, I know a lot of people like to throw a lot of shade on the Trump coin, but the, the Trump Meme coin generated so much exposure globally for that sort of like 48 hours when we went from zero to almost 100 billion dollar market cap that.
- [30:16]
Host
You were in that, in that, in the minutes after it was launched?
- [30:21]
Arthur Hayes
Absolutely. I mean, I got a text, I remember I was coming back, I was in a car to the airport in Switzerland and someone in the Maelstrom chat posted, oh, Trump just launched a coin. You know, and I kind of shot on it for a bit in my mind and I went to, now I took a nap, I woke up and it was like, you know, 10 billion dollar market cap. I was like, what am I just buy the thing. So I guess lifted it and, you know, sold it a few days later right before the inauguration and, you know, made a bit of a, made a bit of, made a decent amount of money. So again, you know, are you a.
- [30:51]
Host
Top Trump holder by any chance? Because if you are.
- [30:54]
Arthur Hayes
No, I don't own any. I don't own any at the moment.
- [30:57]
Host
Okay, well, what do you think of that? I mean, you're, you're essentially buying access to meet the president, have dinner with his top advisors and influence crypto policy.
- [31:08]
Arthur Hayes
I mean, how is this any different than, you know, some going on a yacht with some, you know, big donor to whatever party and going into dinner with any politician? It's just how the American system is set up in terms of how you have access. There's these, you know, donor dinners. However much you pay for a plate, you have to know somebody to get in. And then you speak with XYZ different politician. This is. If you own this coin, anyone can buy the coin, it's on the Internet. Then you show up and, and meet Trump. So you could argue that's a little bit more democratized in terms of access. Yes. It's still based on how much money you have, and it always has been based on how much money you have? The poor people are still not meeting the president. They weren't meeting the president under any other administration and they're not meeting the president under Trump. I, I don't see any, any difference. Again, it's just, it's just distribution change. How is the distribution focus around the world?
- [31:56]
Host
Is the meme coin game though, in the end, a giant Ponzi scheme. It's just a pump and dump on retail.
- [32:04]
Arthur Hayes
No, I mean I think it's just a like a pump and dump on the reality of culture. Right. So is this particular part of the culture going to have sustainable value? And if so, then your meme coin is going to last a long time and culture is very fickle. I don't know. I like trading them because it's just because they're fun. I think it's eyes wide open. You can see the tokenomics. Yeah, some things rug obviously even we've had presidents of countries like Mila. He rugged his people. So everybody is on notice that this is literally the freest market in the world and that comes with some consequences as well.
- [32:41]
Host
All right, 20% eth in your portfolio, not Solana. So I guess Any thoughts on ETH vs Solana? And as well as the Vitalik's latest proposal to simplify Ethereum and they've also had this latest Petra upgrade. Are you, are you on top of those developments?
- [32:58]
Arthur Hayes
I honestly, I mean, I've seen the headlines. Have I read into it? Not really. When will I really into it? When the price goes up, just like everybody else. The price creates the narrative. Yeah, it's nice. It's good that they're doing things obviously the foundation beginning a lot of. Because they've been selling a lot of Eve and the price has gone nowhere versus all the other L1s. But at the end of the day, why did I originally buy Eth? You know, many years ago, most developers largest amount of activity on chain in terms of defi and the most secure sort of proof of stake layer one and that's it. Right. So all those things don't matter right now because Obviously Solana at $7 after the FTX composition and the narrative, remember back in when it was 2023 or whenever the run started in Solana and everyone thought that Solana was going to die because Sam was such a crook and he was, you know, the driving force behind, you know, the Solana adoption using, you know, the billions of dollars of stolen money that he had at, at Alameda and ftx. Right. And that was a narrative. Solana is going to die. And then solana ripped from seven to $300. So what's the narrative now? ETH doesn't do anything. All these other guys are faster, better, stronger, blah blah, blah, blah, blah. This thing's a dead coin, right? And so that's the time when you want to, if you have a fresh unit of Fiat, you want to be allocating to the asset that's the most hated. ETH is not going anywhere, just like Solana wasn't going anywhere in 2023. And so I think once we start to see reignition and sort of the upper price trajectory of eth, then all of a sudden everyone's going to be waxing philosophical about how amazing it is that ETH is the strongest POS system by secured assets. It's got the most developer community, it's got the most amount of defi actually happening on Chain and all these other things that no one cared about when Solana was going from seven to 300 because it was all about Meme Coin, Meme Coin, Meme Coin, Meme Coin Pump Fun, all these transactions going through the network. So again, price creates the narrative. I want to own the thing that's hated the most at that point in the cycle.
- [35:06]
Host
When are we going to have an alt season? And this is a question from Alpha. Do you think we're going to have an alt season before BTC starts flying to 200,000?
- [35:19]
Arthur Hayes
Let me look at my chart here. So what's bitcoin dominance right now? It's like 65%. It's been slowly rising. I think we need to get above 70% bitcoin dominance before we start seeing a rotation back into altcoins. So does that probably means that Bitcoin's in the 110 to $150,000 range, I would imagine, before we start seeing people really gunning into Alton, obviously. What does that mean? That means Ethereum needs to go up, right? Because that's the biggest altcoin market cap there's going to have to be. Solana will go up as well, a lot, because that's what number five or whatever it is. Right? So you, you. Maybe it's all these ETFs that are planned in the United States, whether something like 70 or 80 ETFs and all different types of coins that'll be coming to market if we assume that the, the SEC turn more friendly to approving these sorts of things. So again, I don't really see this the true alt season as people understand it, really taking off until you know, late second quarter, early third quarter of.
- [36:17]
Host
This year wanted to switch topics to US China trade. So this week the Chinese Commerce Ministry gave the first official acknowledgment that the US Was reaching out to open trade talks. And now they are meeting with Treasury Secretary Scott Besant in Switzerland. This is after weeks of China was ignoring the United States saying there are no talks, while President Trump was saying that President Xi Jinping called him over the phone. The US has imposed 145% tariffs on China, cumulatively up to 245%. And China has imposed 125% tariffs on the United States. The boats in the Pacific are empty. We talked about that earlier. And the US Will soon, well, people assume will eventually feel the effects. How do you see these China US Trade talks panning out? What's your read of the situation?
- [37:15]
Arthur Hayes
So I would highly suggest that folks who have the ability to consume the works of Michael Pettis. He's a Beida professor, used to be a bond trader at Bear Stearns. He's written a few different books. He's American, but he lives in Beijing and he comments frequently on sort of the China situation. I was listening to a webinar that he gave last week or so. And I also consume a lot of other China strategists and sort of the theme that I'm getting as I listen to these folks are a lot more informed about what's going on on the ground in Beijing is that, you know, Xi Jinping is willing to tolerate a lot of pain to further his goal of becoming sort of this techno nationalist Han Chinese entity. What does that mean? It means that, you know, there's a, I think it's a Wall Street Journal or some sort of Western media article talking about there's like 15 million people already unemployed due to the, the downturn in exports due to the bite of these terrorists, like, oh, the Chinese state's going to collapse and this is going to mean Xi's going to bend the knee to Trump and blah, blah, blah, blah, blah. Right. But I think people forget that, you know, as of five years ago during COVID right. You know, if you lived in Asia, there was, you know, zero covert, right? So China literally locked people in their apartments and said, you can't come out. We're going to deliver you food because we're afraid of, of this virus. And that was for, you know, hundreds of millions of people, especially in tier one cities like Shanghai, which is probably the most Western leaning, pro capitalist part of China. And she was able to lock the Shanghainese in their apartments for many months without any real pushback from the population. So to the extent that he believes that AI and EV manufacturing and certain of these sort of like lower, more robotic things that China can produce is the future, and if it costs him 15, 20, 30 million migrant workers who don't have a job, I think he's willing to take it. So I think this sort of notion that China's going to bend and sort of just come to the table and agree to everything Trump wants just because a few, you know, a few million people are out of a job, that isn't going to happen. And so I honestly think that this whole China US Trade talk is really, you know, each for domestic consumption. So Trump needs to prove that he's been tough on China, his domestic electorate, and she needs to prove that he stood up to the white man, to everyone in Asia and the China sphere. And so I think there's going to be a deal on the surface. But at the end of the day, not much is actually going to change. US will still be getting Chinese goods, whether it's intermediate goods shipped through other countries or directly goods from China. They might cost a little bit more and you know, China might give a few, might say, okay, we're not going to depreciate the yuan or something like that, but at the end of the day, they'll both be able to save face to their domestic populations. But I don't think that the trade balance, the imbalance between the US and China is going to change that much in, in the very near term. And ultimately this is something that I'm going to write about in my next essay. The the only real policy that the U.S. has that actually is going to really work are capital controls. And these are some things that a lot of economic theorists have started to write about in terms of how can you charge those who park their excess savings in the US Financial markets a fee that either dissuades them from exporting so much of their surplus or says, guess what? Okay, well, we're going to take whatever fee from the foreigners and pass it on to the ordinary Americans so that they feel like they're getting something out of this combative capital and trade war. That's what I think is going to happen, but I don't really think much is going to change in the near term. There'll probably be some face saving announcement that both sides can sell to the domestic population that says that they did something positive. But the status quo, which is China ships a bunch of cheap to America ain't changing.
- [41:20]
Host
Is there some precedent for that fee or that theory you have?
- [41:26]
Arthur Hayes
I mean there are too much in the weeds. You can read. There's a paper by at the Hudson Bay Institute, last name and Moran and he basically laid out a whole policy suite of things that could have that Trump and all those in power can, can do. And I think he is the chair of the some advisory agency in the US Government right now and Capital controls which is a. You charge a user fee for treasury. You know, okay, if you hold a Treasury and you're a foreigner, there's an extra fee. There is talk about a, you know, a bond swap where I take your 10 year bond and I give you 100 year bond which is essentially like a 95% default or devaluation or hey, if you own a stock and you're a foreigner, there's some extra fee, there's extra withholding taxes. Just there's different ways to do this. But at the end of the day, if you're a foreigner and you earn a surplus and that surplus must be invested in America because it's the most liquid market, then I'm going to charge you a tax. However I charge you that tax, I take that tax earnings and then I hand it back to the Americans. Like you know, Trump was talking about Americans under $200,000 regularly income won't pay any taxes, stuff like that. That is how you sort of get the American people to swallow, you know, a realignment of trade. I don't think tariffs is the right way because Americans don't like to do hard things. They want cheap goods and they want a lot of them. They want to go to Walmart and they want to buy the cheapest and see a whole plethora of things to choose them. They don't want to, they don't want to be told that you have to consume less. That's just not a very American thing. And that's what Trump is saying right now. Consume less. It's going to be better for you in the long term. It didn't work for Jimmy Carter in the 70s when it said wear a sweater and turn on the thermostat. It won't work for Trump in 2025 when he tells Americans don't buy Barbie dolls because they're made in China. Buy them here in America for 5 extra price.
- [43:11]
Host
But their whole goal is to shift the supply chain, the manufacturing back into the United States. Do you think they'll have any success did that would take years.
- [43:21]
Arthur Hayes
I think they'll have a success eventually. It's just a question of, again, can you get reelected doing it? I don't know exactly. The only thing of going on TV and telling America is buy less stuff and buy it more expensive in America is really the message that's going to resonate with voters in 2026 and 2028. If the message is there are these evil foreigners and they're, you know, they're creating financial inflation. So we taxed them and we took those tax earnings and gave them back to you. And as lower income tax rates, I think that's a winnable election strategy. They all, they both accomplish the same thing. It's just how do you go about doing it and how do you make sure you get reelected following this policy?
- [43:56]
Host
You think he'll try to run again in 2028?
- [44:00]
Arthur Hayes
No, but I mean, you know, how. I don't know how trouble Trump is. What is he, 80 years old or something like that? Right. So, you know, even if he's not running again in the next election, if he's still alive, what's he going to do? Just sit there and garden like he's going to be involved politically just in the same way that Barack Obama essentially runs a Democratic Party, even though he's not going to become president again. So I think these elder statements, he wants something to do. He's got people who are supporting him because they want to have either a longer financial career or a longer political career. So Trump has to look after these people. He's got to give them a way to be in power post 2028. And again, I think that going to the American people and telling them consume less, buy more expensive stuff because it's better for you in the long run is not the winning message. A winning message is, hey, we taxed the out of the foreigners and we gave you lower income taxes. It accomplishes the same thing because a manufacturing deficit is a financial account surplus. So you can, you can attack it in either way and you'll get to the same point.
- [44:57]
Host
Do you think China is dumping U.S. treasuries and stocks?
- [45:00]
Arthur Hayes
No.
- [45:00]
Host
You know, amid this rip.
- [45:01]
Arthur Hayes
No, no, absolutely not. The, the only place their money can go is the American market. And if they're not buying Treasuries, they're buying stocks. And I know it doesn't really show up in sort of, you know, the China line item when you look at the treasury tick data, but they funnel these purchases through the state banks, through countries like Belgium and Luxembourg and, and Europe. And so basically, because again, from Xi Jinping's perspective, he needs to project this image to the Chinese people that they're weaning themselves off of their dependence on the American financial markets, when in actual fact, mathematically they just can't do it. Because if you, you know, America runs the largest deficit, China runs a largest surplus. Things have to balance. So the, the dollars that China earns selling to the Americans, whether directly to America or through third party countries like Mexico and Vietnam and the like, that money has to get reinvested into the American financial markets. Otherwise the Chinese currency goes up in value and their export competitiveness drops and those employed in those export sectors lose their jobs. And the rich people who own all the factories are pissed off because it's worthless. So I think they have to kind of obfuscate how much stuff they're buying out of off of America. And again, America likes it as well. They don't want to. Trump doesn't want to go and say, hey, look, China is owning more and more of our financial assets. It's great that it's great for both sides that it's kind of opaque as to how these things are, are working.
- [46:25]
Host
All right, there is speculation, I mentioned before that the US will devalue the dollar that to be more competitive in exports. Thoughts on that?
- [46:35]
Arthur Hayes
As I said, it's a natural outcome of rebalancing the economy. If foreigners sell less things than dollars and those dollars are not vested in the financial markets, the dollar will go down in, in value. And we've already seen that. And furthermore, if you are a pension fund or insurance company in Asia, especially like Taiwan, Korea, Singapore, and you've been used to your domestic currency depreciating against the dollar since the Asian financial crisis. Man, you know, this is, you know, the state sponsored policy to help export competitiveness and rates at home are very low, but they're very high in the US Markets. If your currency starts to appreciate or you start to fear that there's going to be taxes on your capital, then you leave. And that's why we saw the Taiwan dollar appreciate 10% over the last three days. Like a six sigma move, Hong Kong dollar is at the tightening end of its ban. Currencies across Asia are surging against the dollar as all these flows post the 1997, 98 Asian financial crisis are reversed and we have all this money coming back into the region and that consequently means a weaker dollar is again, Trump Besant, Powell. They're not literally sitting there just dumping dollars in the foreign effects markets. It's just a consequence of the policies they're pursuing.
- [47:53]
Host
Finally, I wanted to talk about your, your pardon. And I know you've talked about it in other podcasts and whatnot, but in 2022, you pled guilty to U.S. bank Secrecy act violations and you were sentenced to six months of home detention, two years of probation, and a $10 million fine. Trump promised to free Ross Ulbricht, the founder of the Silk Road, which he did. And there were calls to drop the extradition case against Roger Vere. But I think everyone was surprised when you were pardoned along with your Bitmex co founders. So first I'm just curious, how did it feel and where were you when you heard the news?
- [48:32]
Arthur Hayes
I think there's a video of me at Space Club in Miami. I was there for Music Weekend. That's when I heard the news. It kind of takes a, oh, great, okay, let's party some more.
- [48:40]
Host
So, yeah, that's where I was and I guess. How did you do it? What was the process? And did you think you had a good chance when you started the process?
- [48:49]
Arthur Hayes
So again, I can't get into details and exactly how went about doing it, but there is a way to go about these things. There's a part in office, there's all sorts of forms you can fill out. It's actually not that complicated. Obviously very low probability that you ever do or anyone ever does get a presidential pardon. And so, yeah, no, we took a yo on going through the process and luckily Trump decided that our case was worthy of a pardon.
- [49:17]
Host
Why do you think you rather than say cz, SVF or even Roger Ver for that matter?
- [49:23]
Arthur Hayes
I have no idea. That would be that I actually know what's going on in the mind of Donald Trump. And again, if I knew that, then I'd probably be much more richer than I am already.
- [49:31]
Host
Have you developed a relationship with Trump? I know you visited Mar a Lago.
- [49:38]
Arthur Hayes
I have not met the man.
- [49:39]
Host
Okay, okay. I guess you feel indebted to him in some way. Will you, will you get the 10 million dollar penalty back? Or I. And I guess now, unfortunately you don't.
- [49:50]
Arthur Hayes
Get, you don't get the money back. I wish I did. That would be nice.
- [49:56]
Host
What does it mean for your life? And you know, how will it be different now than when you have to live under the burden of a felony conviction?
- [50:06]
Arthur Hayes
I mean, you know, the, the sad part about the American criminal justice system is that if you have a lot of money, things are much different. You know, those who are felons in the US who are very poor, can't get jobs and all these other things about how up the system is there. So, you know, to say that I suffered an immense hardship because I was a US Felon is probably a, you know, mischaracterization of the facts. So, you know, I don't live in America, I live abroad. Is it annoying? Sometimes that's fill informed saying you're filling. Yeah, but I think that's probably about the, the extent of things.
- [50:37]
Host
Would you ever come back to the United States?
- [50:40]
Arthur Hayes
I mean, I come back, I travel there all the time. But do I want to live in the U.S. no. And it has nothing to do with what, you know, pardon or no pardon. I've lived in, you know, Southeast Asia, Greater China for half my life. And that's where my life is. And I will continue to live out here.
- [50:54]
Host
All right, Arthur, I thank you so much for your time. I appreciate it. Always whip smart and you do not hold back and you have edgy insights that can sometimes sound. Well, no, they're always rational. So I appreciate that.
- [51:11]
Arthur Hayes
Thanks for having me.
- [51:12]
Host
All right, that was Maelstrom Capital founder and Bitmex founder Arthur Hayes.
- [51:21]
Arthur Hayes
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- [51:43]
Host
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- [51:46]
Arthur Hayes
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