Arthur Hayes: AI capital misallocation will ultimately benefit Bitcoin and gold

Author | The Rollup
Editor | Wu Says Blockchain

On September 8, 2026, Arthur Hayes, Chief Investment Officer of Maelstrom, was interviewed on The Rollup podcast, discussing the global macro environment and the outlook for the cryptocurrency market. He believes that Japan's gradual easing of large-scale yen arbitrage trading, combined with rising risks in the French bond market, may force the Federal Reserve to accelerate the creation of dollar liquidity, and the euro to yen exchange rate is an important leading indicator to observe this change. Hayes also talked about the unit economic model of the AI industry, potential rescue measures the government might take, and their impact on fiat currency depreciation trades, and introduced Maelstrom's current market allocation, explaining why Ethereum is a significant position for them in this liquidity cycle.

Editor's Note: Arthur Hayes is known for his strong opinions and willingness to make predictions, but his market forecasts often change, and he has repeatedly acknowledged a high failure rate in his predictions. Therefore, readers should not view his specific price targets, timelines, or trading actions as investment advice. More than the predictions themselves, what is more noteworthy in Hayes's articles is his analytical framework and thought process regarding the relationship between global liquidity, monetary policy, fiscal systems, and the cryptocurrency market. Wu Says reprints his article mainly to provide readers with a reference perspective for observing the macro and cryptocurrency markets.

The guest's remarks do not represent Wu Says' views and do not constitute any investment advice. Please strictly adhere to local laws and regulations. Audio transcription and translation were completed by GPT and may contain errors.

Japan's Capital Repatriation May Become a Catalyst for a New Round of Cryptocurrency Market Surge

Host: Arthur, it's great to have you back. Welcome to the bull market. The on-chain market is heating up, mainstream coins are rising, but institutions and people in the AI circle seem to still be on the sidelines. I attended the Federal Reserve meeting in Jackson Hole last week. Kevin Warsh mentioned at the beginning of his speech that he had hiked in Jackson Hole twice, once very difficult and once very easy; the market has reacted very strongly this week. What is the current state of the macro environment? Scott Bessent and Warsh are both taking action; what do you think?

Arthur Hayes: First of all, Warsh is not important; what he says doesn't matter. He gave that speech about two weeks ago, but I think the really important things are happening recently. I wrote a whole article about this, which is also my main focus right now.

In modern global financial markets, Japan is often associated with various significant changes. Around mid to late July, Japan's Finance Minister Shunichi Suzuki stated that domestic institutions need to reassess their asset allocation standards, reduce holdings of foreign assets, and increase investments in domestic Japanese assets. She was actually referring to the Government Pension Investment Fund (GPIF). GPIF is Japan's largest pension fund and has a quasi-governmental nature. At that time, the dollar to yen exchange rate was around 160 to 163.

Everyone might agree with this direction, but the question is whether the government will take measures to make it happen. The last time GPIF made a significant adjustment to its asset allocation was after 2012, and then individuals and companies followed this change. At that time, Shinzo Abe implemented Abenomics, stimulating the economy through money printing and hoping GPIF would increase its allocation to foreign securities and decrease its allocation to domestic securities. It took him two years to get GPIF to formally agree, which included replacing opponents and appointing supporters of this direction. Subsequently, GPIF released a framework to increase foreign assets and reduce domestic assets, and the market started, with the dollar rising against the yen, the yen weakening, and Japanese investors beginning to invest overseas, with others following suit.

Therefore, I initially thought that GPIF might not start selling U.S. Treasuries and buying Japanese government bonds for another two to three years, which was not something to pay immediate attention to. But then there was the first yen intervention: Bessent sold euros, bought yen, and suggested that the Federal Reserve should remove the single counterparty limit on the Foreign and International Monetary Authorities Repo Facility (FIMA Repo Facility). He was essentially pressuring Warsh to fulfill his responsibilities and remove this limit. This means that institutions like GPIF do not have to sell U.S. Treasuries but can use U.S. Treasuries as collateral to obtain dollar loans from the Federal Reserve, then sell dollars in the forex market, buy yen, and finally bring the funds back to Japan.

This is just part of the puzzle because Warsh also needs to convene the relevant financial subcommittee, and the committee must agree to do so. After that, the U.S. Treasury proposed to increase the scale of Treasury repurchases by $20 billion, but relative to the bond market of about $40 trillion, this is not significant. Bessent stated again last week or earlier this week that the Bank of Japan needs to raise interest rates more quickly. Similar statements have been made before, but the key is still what actions he is prepared to take.

This week there is also a G20 meeting. I believe that some sort of agreement may have been reached off the record during the meeting, and the Japanese side finally received the message. Bloomberg reported that GPIF held an unscheduled meeting in August. August is a holiday month in Japan, and it is unusual to convene an unscheduled meeting at this time. We do not know what was discussed in the meeting, but previously the Japanese government had requested an increase in Japanese asset allocation, and Bessent also called for Japan to increase its domestic assets and sell U.S. assets. Subsequently, the dollar to yen exchange rate dropped from 160 to 155 in a single trading day, and the euro to yen also fell by about 3 yen during the Asian trading session, which is a significant fluctuation.

I believe an announcement may come soon: either the limit on the FIMA Repo Facility will be raised, or GPIF has begun to adjust the allocation weights between domestic and foreign assets. The cryptocurrency market and other markets reacted overnight to this. Meanwhile, Waller stated that inflation does not seem to be that severe, and the Federal Reserve may not need to raise interest rates. Looking at these things together, the goal is to weaken the dollar and strengthen the yen. This has been one of the primary goals of the Trump administration, as they sought to reshape the global trade framework.

To achieve this, the yen must appreciate. The yen may be the most undervalued currency globally, aside from the renminbi. It is difficult for the U.S. to take the same actions against China, but it can influence Japan because Japan relies on U.S. security guarantees. I believe this is the reason for the rise in the cryptocurrency market. The market has been digesting various information, and now a substantial change has finally occurred. The drop of the dollar to yen from 160 to 155 without clear news indicates that something has changed.

Therefore, I believe the market has started. Cryptocurrency assets and other assets rose overnight, while the S&P index remained roughly flat or fell, and tech stocks and AI trades did not see significant increases, indicating that there is a liquidity logic behind this. In the coming days or weeks, there may be more information disclosed proving that an agreement was indeed reached during the G20 and that corresponding arrangements will be introduced to create dollar liquidity to suppress the dollar and boost the yen.

Japan Inc. is Reversing the World's Largest Yen Arbitrage Trade

Host: Weakening the dollar means boosting our assets. You did not discuss yen arbitrage trading in detail in your latest article. Many people think of arbitrage trading or basis trading when they think of Japan and the yen. Is this related to the logic you just described? If so, what impact will it have?

Arthur Hayes: I refer to Japanese society as "Japan Inc.," which operates the world's largest yen arbitrage trade. If you observe Japan's consolidated balance sheet and include private sector assets, you will find that Japan has actually been printing yen and purchasing foreign assets.

As the yen depreciates and the assets held by Japan, such as U.S. tech stocks, rise, Japan's overall performance has been very good. Some people only focus on single indicators like the debt-to-GDP ratio, but Japan should be viewed as a whole. Although Japan claims to be a capitalist society, it has strong communal and socialist characteristics, with capitalism being more of an external form. Ultimately, there exists a "Japan Inc.," and yen arbitrage is a nationwide trade, with Japan being the largest participant in this trade.

Once GPIF is asked to pivot, "Japan Inc." will also take action: selling foreign bonds and stocks, selling foreign currency, buying yen, bringing funds back domestically, and investing in Japanese government bonds, local businesses, and real estate. This is precisely the directive issued by the government. It will take some time to initiate, but once it starts, one should not stand against this trend.

The problem the U.S. faces is that Japan has held these assets for the past 30 years, driving up the U.S. market. When the entire U.S. system relies on the financial gains from rising stock markets and continuous bond issuance, how should this trade exit? The only way for the U.S. to respond is to print money, taking over the trades Japan has done in the past.

Japan's past strategy was that it didn't matter if the dollar to yen rose to 200, as long as it could reinflate the domestic economy and use inflation to escape the problems left by the real estate bubble of the 1980s. The U.S. is currently adopting a similar strategy: even if the dollar index falls to 50, as long as it can become an industrial power again and reduce the debt-to-GDP ratio from about 100% back to around 30% as it was after the last similar strategy, it is acceptable. Both are essentially the same trade. It takes a long time to form, but once it starts, it is difficult to go against the trend.

U.S. Monetary Policy is No Longer Truly Restrictive

Host: Warsh talked about the deflationary effects of AI and innovative technologies at Jackson Hole, and at the end of his speech, he expressed concerns about inflation. The changes you describe seem to mark the beginning of a broader rotation. After the pandemic, U.S. financial policy has been extremely loose; the past four years have been in a high-interest-rate environment, and quantitative tightening only ended about six months ago, with the Federal Reserve's balance sheet stabilizing and starting to rise since then. Do you think U.S. financial policy is transitioning from a restrictive environment to a more accommodative and supportive phase?

Arthur Hayes: The truly restrictive period of the U.S. monetary environment was only from December 2021 to October 2023. After that, Janet Yellen began issuing more short-term Treasuries and bonds, pulling $2.5 trillion out of the reverse repo facility. For holders of cryptocurrency assets and other assets, the market has re-entered a rising phase since then.

As you said, AI trading is their "get out of jail free card." The U.S. has printed a lot of money over the past fifty or sixty years. According to normal mathematical logic, the cost of interest and the scale of debt grow exponentially, making it almost impossible to solve solely through economic growth. But now there is a new thing called AI. The narrative is that as long as AI is developed and the U.S. wins the AI competition with China, the debt problem will disappear, and productivity will increase significantly.

This is why Warsh, Trump, Bessent, and everyone else are talking about AI. Only in this way can they explain to voters: there is no need to worry about how much the government spends, nor to worry that government spending as a percentage of GDP is higher than ever except during times of war or pandemic, because the U.S. has AI and will win the AI competition. But these people may not even know what AI specifically means; they just accept the narrative sold to them by Dario, Sam, and Elon.

AI will also be integrated into the same transaction. If AI is the only reason the government uses to explain how to solve the deficit problem and why there is no need to worry about spending, what will the government do once large AI labs come under pressure due to unsustainable unit economic models? It will bail out these companies, and the way to do that is to inject more funds.

Therefore, the relevant trade structures in Japan and the issues in Europe will prompt the United States to create more currency; AI gives the government a reason to save face. The government has already wasted trillions of dollars on these illusion-inducing chatbots, which will also be a reason for it to continue injecting large amounts of money into the market. The combination of these two factors will help crypto assets reach new highs.

AI Capital Misallocation Will Ultimately Benefit Bitcoin and Gold

Host: Over the past 6 to 18 months, the logic of fiat currency depreciation trades in Bitcoin seems to have failed, with Bitcoin performing poorly, while gold has risen, and tech stocks have significantly outperformed the market. With strong performances in AI capital expenditures, storage, and other sectors, will the shift you described make gold, Bitcoin, and other fiat currency depreciation trade assets benefit more than pure tech assets?

Arthur Hayes: Yes, I believe this change is starting now. A friend just sent me the latest cover of The Economist, which portrays Nvidia CEO Jensen Huang as a magical wizard, as if Nvidia has no cash flow issues, no revolving financing, supplier financing, or accounting tricks like "Enron 2.0"; just add an AI chatbot, and it becomes the best company in history. I think this is a signal of a market top. When The Economist tells you something, you should do the opposite because their judgment is very foolish.

The current situation is very favorable for Bitcoin and gold because politicians can no longer stop spending. Otherwise, they would have to admit to the huge mistakes made previously, including issues surrounding data centers, social media, and tech companies using user data. If the government acknowledges problems with the direction of AI and changes policy, it must withdraw support for the industry, forcing people like Elon to bear capital costs without special regulatory arrangements, and no longer seek more investment for loss-making companies under the nationalist narrative of US-China competition.

At that point, companies will either make money or not. Companies like Anthropic should also disclose real profits, not just revenue figures; if they continue to burn cash, they should clarify the unit economic model of their reasoning business. Potential IPO or secondary market investors need to see this information.

But this situation clearly will not happen because politics does not work that way. This is precisely why Bitcoin, gold, and other similar assets will perform well: we have entered a phase of capital waste. The government will produce a large amount of newly created funds to extend these loans to cover previous mistakes because it cannot admit to wasting huge amounts of money.

Host: In the past, the government spent money on AI, M2 increased, but funds did not flow into crypto assets. Are you saying that the capital allocation for AI is a capital misallocation, and the funds used to address this misallocation will ultimately flow into digital assets?

Arthur Hayes: Yes.

Host: Will the same group of investors buy crypto assets, or will it be a broader group of macro investors, companies, and funds? With the advancement of the CLARITY Act, regulatory signals of support being released, and the warming of areas like tokenization, will venture capital firms buy Bitcoin after exiting Anthropic? Or is this just a broader trend shift?

Arthur Hayes: This is essentially just central bank balance sheet expansion. I cannot point to any specific person who will definitely buy Bitcoin. I believe many venture capital firms will actually suffer severe losses. They tell investors that they have achieved extremely high paper returns by investing in these AI labs. Perhaps Anthropic can go public, but it needs to do so quickly because the number of skeptics is increasing.

The situation for OpenAI is more difficult; it needs government bailouts or some form of merger. Sam Altman must design impressive financial engineering to complete the deal. As for Anthropic, it depends on whether Dario Amodei can do it.

But much of the funding for many venture capital firms is actually locked up. If these companies' stock prices drop by 50% to 60% after going public, and liquidity disappears, I don’t know how these firms will deliver the DPI promised to investors without government bailouts. So, it’s not that "people in the AI circle will invest in crypto assets." People in the AI circle have no cash, only some paper assets.

If the central bank continues to push up these assets, they might be able to exit and get cash, then buy crypto assets. But a more appropriate understanding is that the central bank is conducting widespread balance sheet expansion to cover capital misallocation. Bitcoin was created for this purpose. What happened in 2009? Policymakers expanded the balance sheet to cover capital misallocation in the housing sector. This time is essentially the same, just on a larger scale, and the target has become AI debt.

Who Controls the Market Narrative?

Host: There are many factors involved here. AI founders like Sam, Dario, and Elon were once valued by the government; Trump advocated for capital repatriation and nationalist policies, and Japan has also begun to promote capital repatriation; Bessent is trying to finance the entire system. Who is controlling the narrative now? It seems Bessent is coordinating everything: getting Japan to unwind arbitrage trades, sell bonds, while getting Warsh to cooperate for US Treasury financing. Is that correct?

Arthur Hayes: Bessent is a firefighter. The real narrative is set by the market: a 10-year US Treasury yield rising to 4.8% will set the narrative, and the dollar rising to 160 against the yen will also set the narrative. Bessent is just the only capable person in charge. He faces many spinning plates and needs to keep them from falling, so he can only strike a deal here and another deal there.

Policymakers are completely constrained by the market and can only do their best under all the imbalances accumulated over the past few decades. Ultimately, these issues can be traced back to the post-World War II system, resulting from the interaction of various events over nearly a century, which has led to today's situation.

Therefore, individual politicians are important, but not that important, because they ultimately cannot overcome mathematics and compounding.

The Federal Reserve Chair Will Ultimately Cooperate with Government Spending

Host: If the market controls the narrative, who controls the money printer? Is the person controlling the narrative the same as the one controlling the money printer?

Arthur Hayes: In practical terms, Warsh is the Federal Reserve Chair; he controls the balance sheet and can create money. But ultimately, one can refer to former Federal Reserve Chair Arthur Burns' speech "The Anguish of Central Banking." He delivered this speech in 1979; I can't recall the location. Burns was the Federal Reserve Chair before Volcker, and financial historians generally believe he allowed inflation to run rampant.

The core point of that speech is that Federal Reserve Chairs believe in sound monetary policy when they take office and claim they will defend the independence of the Federal Reserve. But ultimately, they are still an appendage of the American system. The American public votes for politicians who implement specific spending plans; what right does the Federal Reserve Chair have to oppose that?

So, no matter how much you believe your duty is to protect the independence of the Federal Reserve and the value of the dollar, the real duty is still to cooperate with government spending supported by the votes of the American public. In the end, you will always print money and will always meet the president's demands in some form. History has shown that the outcome is the same whether the Republicans or Democrats are in power. What was said before taking this position does not matter; once in the position, superiors will always demand that you create money in some way.

Warsh reportedly resigned from the Federal Reserve Board around 2011 due to opposition to quantitative easing. In the following 15 years, he made many tough statements in the private sector, but his opinions did not affect policy. Now that he is at the Federal Reserve, what has he done? He formed a working group, and the working group will ultimately only submit a report.

Host: So you think he won't raise interest rates at the meeting in a week or two?

Arthur Hayes: I think he will keep rates unchanged. They can easily find some third-order rate of change from a government inflation indicator that does not include things people actually spend money on and then claim that this indicator is declining year-over-year, thus allowing them to keep rates unchanged.

Meanwhile, the nominal economic growth rate in the US last quarter was about 8%, but short-term rates were only 3.5% to 3.75%. This is a textbook operation. By keeping rates unchanged, Warsh can continue to appear hawkish while claiming that reserve management purchases are not true balance sheet expansion or quantitative easing, but merely operations to address technical issues in the repo market. Most American voters do not really understand the repo market, and this explanation may be sufficient to pass muster. Bessent will continue to try to maintain balance on the other side to prevent problems from exploding in his hands.

Bitcoin May Break Historical Highs by Year-End, But the Rise Will Not Be Smooth

Host: Warsh spent five minutes criticizing forward guidance at Jackson Hole, but at the beginning of his speech, he talked about two hiking experiences. If he raises rates a week and a half later, the market will see this as forward guidance. What does this mean for the market going forward? Will Bitcoin reach a new historical high by the end of the year? Will it continue to rise into the first half of next year? Will Clemente recently stated that he has never been so confident about the long-term outlook. Although there will still be volatility in the short term, the direction of financial repression is already very clear. What is your view on the timeline and outlook for Bitcoin and the crypto market?

Arthur Hayes: I believe Bitcoin may break historical highs by the end of the year. But ultimately, before the US midterm elections, the government still cannot reveal its true intentions too clearly. The most pressing issue for American voters is the affordability of living, and Trump must find a way to explain why the various easing measures the government is taking do not constitute money printing.

I don’t know if it would really help Trump if Bitcoin rises to $500,000 the day before the election. For global crypto asset holders, we certainly hope that happens. On one hand, the structural factors we discussed earlier require the government to create money, and we know this will happen; on the other hand, American politicians must also manage a clear political timeline.

They cannot let the outside world think they are pushing the Federal Reserve to print money. As Scott Bessent mentioned in a commentary in The Wall Street Journal, by now, most Americans believe the Federal Reserve is an unequal creator. Therefore, the government must maintain a facade that makes people believe it still cares about the purchasing power of the money earned by American taxpayers.

So, I am very bullish and completely agree with the views of your previous guests. But the market may be very volatile; it may rise quickly first, then consolidate for a while, or even pull back, before continuing to rise. As we move step by step toward massive money printing, this rhythm will repeatedly appear in the market.

Host: As Rob said, the oven is still preheating, and the money printer is also in the preheating stage. The food has not yet been put in, and the pizza is still waiting, but all of this is coming.

Ethereum is a Large-Cap Asset with Good Risk-Return in Liquidity Markets

Host: You once wrote that you have built what might be the largest Ethereum position in history. Do you still maintain a long-term view? Our audience might say that you will sell ETH to them after the show. How long do you plan to hold? What does your current portfolio look like?

Arthur Hayes: Ethereum is the most unpopular large-cap token in the market. Ultimately, if you want to take on more risk than Bitcoin but don’t want to see a 75% drop overnight due to protocol issues, then Ethereum is the right choice.

It was also the worst-performing large-cap token in the last cycle and hasn’t even broken through its historical high of nearly $5,000 in 2021. Therefore, I think the risk-reward for Ethereum is very good. This is also why, in this round of liquidity-driven market, ETH is one of our larger positions.

We also hold some other logically similar assets, but the position sizes are significantly smaller, such as ether.fi and Ethena.

EUR/JPY is a Leading Indicator of Accelerating Dollar Liquidity

Host: In your latest article, you mentioned that the euro against the yen is currently the most noteworthy indicator because it is the only leading indicator of the acceleration of dollar liquidity creation in the short term. Those who understand the logic of Bitcoin know that dollar liquidity creation is at the core of fiat currency depreciation trades. But the acceleration of liquidity creation is a second-order change, meaning that money printing is starting to accelerate. Why can the euro against the yen tell us in advance that the growth of money supply will accelerate?

Moreover, Bessent often sends signals to the market, and the market trades these signals in advance. He recently described this relationship using "momentum" and "kinetic energy" in an interview. When he hints to the market that the Treasury will buy back long-term government bonds, the market will trade in advance, accumulating a lot of momentum. When the policy is finally implemented, will there be a "buy the expectation, sell the fact" scenario? Or will the actual scale of money creation be enough to fulfill his signals and push the market higher than current expectations?

Arthur Hayes: We have clearly increased our positions before the Fed's balance sheet began to rise. The balance sheet is indeed rising now, but compared to the COVID pandemic or 2009, the extent is not extreme. That’s why Bitcoin has only risen from about $63,000 to $80,000, which is not a particularly large increase.

To address the perception issues brought about by a significant expansion of the Fed's balance sheet, a real crisis is needed. The crisis on the yen side is that those who are long on the yen in euro/yen trades, including GPIF, Nomura Securities, and Japanese individual investors known as "Mrs. Watanabe," are selling foreign assets because the Japanese government has asked them to do so. To prevent these institutions from directly selling assets, loans need to be provided to them so they can finance through repos. This is a pillar of balance sheet expansion and will also drive the yen's appreciation.

The issue on the euro side lies in the repo market. Large French banks led by BNP Paribas, Crédit Agricole, and Société Générale account for about 20% of the repo market. If there are problems with the euro, the market that will bear the brunt first will be France, as Japan holds a large amount of French debt.

If Japan cannot sell U.S. assets because the U.S. has many military bases in Japan, it can sell European assets, and the first to be sold will be French assets, including French government bonds OAT and French bank bonds.

As the situation in France deteriorates, France cannot legally print money on its own under the rules of the euro system. However, newly elected French politicians may think of themselves as the President of France rather than the President of the EU, with the duty to meet the needs of the French people and the country. France needs more funds and needs to achieve depreciation within the euro system. If it does not exit the euro, the French government may ask the French central bank to implement quantitative easing domestically. This action would not be legal under EU rules, but the French government might take action under the pretext of saving the domestic bond market.

The EU might tell Le Pen and Mélenchon: "I have the ability to create euros and save the French bond market, but since you are unwilling to bow to me, I will not buy French bonds." Since neither side is willing to compromise within their respective power structures, it may ultimately form a de facto "soft Frexit." This is the logic behind being short on the euro.

Since December of last year, the Fed has already shifted to quantitative easing to support the repo market. The repo market finances short-term U.S. Treasury bonds, and currently, the largest issuer of short-term Treasury bonds is Scott Bessent, so these issues ultimately belong to the same trade.

If the euro against the yen drops from about 182 to 140 or even 120, the French banking system will face serious problems, and the only solution will be to create money. This could also mean the end of the euro system, as France cannot unilaterally print money without breaking away from the European Central Bank.

If French banks are concerned about capital controls or some sort of currency system similar to a "quasi-euro lira," they will need to exit the U.S. repo market and bring capital back home. This would mean that the commercial bank balance sheets that the Fed thought it could rely on would no longer exist.

As a result, the Fed must increase reserve management purchases, and it is already doing so. The Fed can explain this is not quantitative easing for technical reasons such as duration and hope that the American public does not understand its true meaning. This is how the euro shorts create money, and this is why I believe that the euro against the yen can reflect whether the two specific factors that force the Fed to rapidly increase the money supply have been activated.

What can truly push Bitcoin to $250,000 or $500,000 are these actual changes, not just Bessent's statements about future policies.

Host: You referred to Scott Bessent as "Buffalo Bill Bessent," is it because he has issued a large amount of short-term Treasury bills?

Arthur Hayes: No, the nickname comes from the serial killer Buffalo Bill in "The Silence of the Lambs." I call him "the national serial killer": if you do business with Iran, sanctions will come knocking.

AI Assets May Still Rise, But Performance May Not Match Scarce Assets

Host: From an investor's perspective, how should one allocate their portfolio in an environment where market structures are changing? Many listeners have a high allocation to crypto assets, but many others have left the crypto market for AI, achieving high returns in storage and capital expenditure trades. How should one allocate if both crypto assets and other assets are included?

We have been discussing a barbell strategy: one end consists of hard currencies and scarce assets that benefit from currency depreciation and loose monetary policy; the other end consists of on-chain businesses with reasonable fundamental valuations that can truly generate profits, benefiting from the crypto industry gaining higher legitimacy. Which end of the barbell might perform better? What about other assets?

Arthur Hayes: If you are an AI investor and have made a lot of money through AI, it is because the rate of change in AI development is very high in 2025 and 2026. But that phase is now over. This does not mean that AI-related assets won’t rise, but their increases may not be as large as before because the market has entered a phase of questioning whether it was correct to invest so much money previously, and the market usually peaks in this phase.

The Nasdaq could still rise another 40%, 50%, or even 60%, but at the same time, Bitcoin could rise to $1 million, gold could rise to $15,000, and defensive assets like ExxonMobil could also multiply several times. AI assets will still rise, but their performance may not match that of other assets. As for which other assets to choose, it depends on individual cognition and preference.

I am clearly focused on the crypto market. In this macro environment, I believe Bitcoin is the fastest horse, which is one end of the barbell. The other end needs to consider which assets will benefit when people start to believe that politicians will not continue to print money.

I think this situation will not arise until the 2028 U.S. presidential election. The opposing Democratic Party may propose raising taxes because the wealthiest have made a lot of money in this round, while ordinary people have become poorer and inflation is rising. Regardless of whether the Democrats actually raise taxes, the key point is that the market will worry about their winning the election. They are likely to win because U.S. politics often swings back and forth like a pendulum. At that time, the market may start to worry that the future scale of money printing will not be as large as previously expected, and investors will need to allocate to the other end of the barbell.

For me, I hold a significant equity position in a volatility hedge fund that expresses this view through options trading. Investors can also choose other types of businesses: these businesses can still perform well when the money printing machine is turned off and the monetary environment tightens again.

Host: Our understanding is that one end of the barbell consists of fiat depreciation assets in the crypto market, such as Bitcoin and Zcash. They have higher upside potential, but the drawdowns can also be significant, especially for Zcash. The other end consists of assets like Hyperliquid and ether.fi. After the unlocking for investors ends, they have better token economic models and repurchase mechanisms, which may provide higher downside support, but the upside potential is lower because there is an upper limit to fundamental valuations, and only business expansion can further drive token prices.

We have been doing podcasts for many years, and now the industry has finally entered a stage where it can "deliver actual results," which is also why we believe the bear market has ended. Besides policy changes, the tokens themselves are beginning to have real businesses and good performance. Many early participants have made money and left, but the industry seems to have entered a mature phase similar to the internet bubble after the crash in 2001. The assets that followed rose for 25 years, with slow growth, repeated bottoming, and significant drawdowns along the way. The crypto industry will still have cycles, but in terms of products and external output, it seems to be entering a long-term development stage, and the substantive value in the industry is greater than in the past.

Arthur Hayes: Good, I hope so.

Hayes Believes HYPE's Current Risk-Reward Is Not Ideal

Host: At what level are you planning to re-enter Zcash?

Arthur Hayes: As for HYPE, I still believe its risk-reward is not good. This does not mean it won’t rise; it will definitely rise. But under the same risk capital, its increase may not be as much as Ethena.

That is my current view on Hyperliquid. As for Zcash, it depends on the progress of formal verification and other work.