Hasu's Full Conversation with Su Zhu: The Sovereign Individual and How Cryptocurrencies Deconstruct the Nation-State?
TechFlow Selected TechFlow Selected
Hasu's Full Conversation with Su Zhu: The Sovereign Individual and How Cryptocurrencies Deconstruct the Nation-State?
Exploring the great ideas behind cryptocurrencies from a fundamental perspective.
Navigating Web3 tides with focused insightsThis article is compiled from the latest episode of the Uncommon Core podcast, co-hosted by Su Zhu (CEO and CIO of Three Arrows Capital) and Hasu (crypto researcher and writer), exploring the foundational ideas behind cryptocurrency. The discussion covers international politics, economics, and how crypto intersects with personal future development. Given its high information density, TechFlow has translated and edited the content with authorization, without altering the original meaning.
TL;DR
1. Every country is trying to figure out cryptocurrency.
Technology is long-term—it’s about stories of the future, ideas about future value. If you underestimate it now, then clearly its future value diminishes. Is cash flow more valuable in the short term? Not necessarily—but the reality is that outside of cash flows, there are no other options.
3. Bonds and fiat are locking in massive losses, yet people hold firm: I must have growth! I must have the future! I don’t have a choice whether to buy or sell!
4. Whether we’re entering a recession, stagflation, or prolonged deflation, I don’t believe most industries worldwide can escape the technological and economic disruption underway.
5. Over time, people will allocate a fixed percentage to cryptocurrency, and as understanding grows, that percentage will increase.
6. Central banks ultimately became the largest buyers of bonds across many countries—Europe, Japan, and the U.S. In the long run, this is actually terrifying because it means governments are essentially lending money to themselves.
7. Policymakers today want deflation, but they aim to achieve it by instilling fear in consumers so they won’t spend too much. They want to suppress demand at its core—discouraging indulgence and overconsumption, which could push mortgage rates higher. They want to scare everyone into staying within their means. They believe inflation is just temporary.
8. Inflation may peak in Q2 this year, and we’ll start seeing signs of slowing growth and deflation. But personally, I don’t think the economy will enter a recession unless the Fed forces it into one—and that’s not their goal. Although the U.S. is aggressively fighting inflation.
9. Because this is what Western central banks need—if they can’t generate such deflation, they have no real way to escape their current environment.
10. Media loves talking about inflation because it generates heat. It’s clear we have inflation now, which angers people, but long-term deflation is harder for people to grasp—a reality Japan has lived with for over 30 years.
11. Cryptocurrency is entering a major league phase. People ask: When should I hold crypto? What events in the world should I trust? What kind of world am I investing in? What developments might harm my portfolio? Which ones help?
12. Personally, I don’t think deflation matters much for crypto itself right now, because crypto is still early—these macro forces aren’t strong enough to impact the total market cap of crypto assets. But on a macro level, we need to understand how traditional finance views crypto. Like what Three Arrows Capital did before: understanding market sentiment, how people decide whether to hold Bitcoin or Ethereum, and what they think needs hedging.
13. Regarding the political implications of Ukraine and Russia, what I’ve observed is that people previously criticized crypto’s speculative and disruptive nature as dangerous. Now they’ve shifted—they only debate how disruptive it is, or whether it makes the internet world better or worse.
14. On the question of better or worse, I have two different views: First, crypto makes the internet world better—Ukrainians used it to move funds in and out. Second, we’re in an unprecedented era—not focusing on whether something should happen, but what will happen next. Both Ukraine and Russia are doing more with crypto now.
15. We believe in a multipolar world order. We don’t think the U.S. can sanction individuals or manage global order. Geopolitical moves are rational responses to actual and expected global developments.
16. The Middle East's crypto developments are fascinating because they support alternative parallel financial systems. The West supports such systems too, but the Middle East version is better because it’s a credible neutral system.
17. Crypto will become everything. I’ve been reading "The Sovereign Individual," where the concept of “super-political power” explains crypto well. Peer-to-peer encryption is a “super-political power,” like the printing press—impossible to ban.
18. China wants its people to enjoy life, reduce testing, and try to relax as much as possible. Because China also doesn’t want hundreds of millions competing for things that ultimately offer no return.
19. We've already seen many DAOs die—we’ll also begin to see many liberal democracies die.
20. People will start moving to places where they can build communities with others they’ve already met online. Pilgrims went to the East Coast, to Plymouth Rock, for the same reason.
21. Asking someone to sacrifice for the nation is extremely difficult—in many cases, people would rather sacrifice for their tribe than for the state. How will modern generations use this freedom to shape their lives? This is a wide-open question—not just for knowledge workers, software developers, but anyone working online: marketers, content creators.
Once you detach from reliance on the nation-state, you also detach from needing your national fiat.
23. To some extent, I think volatility is good for the market. It shakes institutions, but not individuals. If you look at trading data, individuals keep buying the dips throughout the cycle—very few individuals sell.
24. Long-term, I don’t think institutional adoption matters much to me or the crypto market. What concerns me is: How do people protect their wealth? How do they transact with each other? And how do governments respond to what people do? But government reactions often revert to first principles—endlessly debating whether people should be doing these things.
Full Transcript:
Hasu: Great to see you again. Our last recording was back in December, discussing Ethereum and other L1s. Any new developments in your life since then?
Su Zhu: Crypto is really fascinating—we’ve seen many different things unfolding. I believe we’ve moved past the speculative wave of crypto and have now entered the steepest part of what I call the S-curve. So we’ll see many countries starting to develop policies, and people adopting it at scale. We’re living in a very captivating era.
Hasu: Do you have any interests outside of crypto now?
Su Zhu: Mainly crypto—no significant new hobbies. We might soon announce more developments regarding our company’s business expansion.
Hasu: Is it because Three Arrows Capital is so deeply involved in crypto that you don’t enjoy doing other things?
Su Zhu:Over the past few months, crypto has been relatively calm, while tech stocks performed terribly. Those holding tech stocks—many of whom also hold crypto—have generally taken losses.
In the past three months, investors raised many questions, all revolving around:
1. Are we entering an era of stagflation (rising prices amid economic stagnation)?
2. Are we entering a spiral inflation era?
3. Are we facing the final turbulence before the long-term deflation Kathy Wood predicted arrives?
These remain unresolved. I don’t think simply letting stocks rebound from lows is feasible. Even with rate hikes, cash still can’t outpace inflation. This ties closely to our economic structure and available investment opportunities. You’ve seen bond selloffs, rising long-term rates—a scenario historically considered terrible for tech stocks.
Technology is long-term—it’s about stories of the future, ideas about future value. If you undervalue it now, its future worth clearly diminishes. Is cash flow more valuable in the short term? Not necessarily—but the reality is that outside of cash flows, there are no other options.
Bonds and fiat are incurring massive losses, yet people stand firm: I must have growth! I must have the future! I have no choice but to hold!
First, I won’t hold commodities. If we face demand destruction, prices will fall, so I won’t hold commodities for three or five years. I also won’t hold fiat long-term, and I definitely won’t hold bonds.
No other research applies to tech stocks and crypto. That’s what I’ve observed lately. When people study fiat, they try to sell high, convert to fiat, then re-enter low.
People are collectively realizing they’re just playing a greater fool game. Once the last fool refuses to sell their growth, a huge rebound follows.
Therefore, whether we enter recession, stagflation, or long-term deflation, I don’t believe most industries worldwide can escape the ongoing technological and economic disruption. I don’t think it’s a luxury to say, “I don’t want tech—I want something safer.” Because we’ve seen safe assets break. Bonds should be safe here, but with negative interest rates, falling stocks, bonds can’t rise anymore. Bonds are now falling—30-year U.S. Treasuries even more sharply. If you own stocks, if you hold Nasdaq, in terms of safety, you haven’t really seen other stable stores of value—they’re also highly volatile.
You could hold oil stocks, but you’re betting on supply chains, on how things unfold. Their volatility exceeds crypto, so they’re not suitable for long-term holding either.
Over time, people will allocate a fixed percentage to crypto, and as understanding grows, that percentage will rise..
Hasu: Historically, it’s rare for stocks and bonds to fall simultaneously, right?
Su Zhu: Usually not. The 60/40 portfolio, which seems strange to crypto natives, is now proving effective. Natural bond buyers are pension funds, due to fixed annuities. They have fixed capital amounts, receiving monthly income to cover expenses—so they naturally buy annuities.
Central banks eventually became the biggest buyers of bonds across Europe, Japan, and the U.S.—in the long run, this is truly frightening. It means governments are essentially lending to themselves.
This logic only holds if we're in long-term deflation—a scenario where printing money doesn’t cause inflation. The reason we won’t get inflation is that technological progress is fast enough, and demographic slowdown is rapid. Most importantly, wage inflation won’t happen—without it, price inflation is hard to sustain. People must earn more, raise base wages. Of course, current technology is wage-deflationary.
From call centers in Kansas to India and Manila, AI chatbots are replacing humans. Inflation surges turn into deflation, as people reconsider pricing, fear spending, and reduce demand. But it also gives companies opportunities—to hire fewer waiters, use tablets instead.
If pushing a button boosts performance, this trend accelerates as older workers retire. Economists once asked: With baby boomers retiring, will we see wage inflation? Some argue labor shortage means higher wages.
I’ve thought about this repeatedly—I’m certain wages won’t rise. It opens the “Overton window” for technology—nearly every industry will adopt tech to reduce labor.
Another interesting aspect of deflation: In the West, much demand is psychological—and some leftists have discussed this for a long time.
Do you know what people actually spend money on? What do they do? An average American who doesn’t want to spend can stay home watching TV, playing video games. This is incredible deflation. He can order takeout, avoid costly car trips, bike around town. If people choose, they can live deflationary lifestyles. Japanese people can live cheaply—even eat relatively healthy meals. Demographics also point toward deflation.
Most spending is for status display. If you enter a negative-growth or different economic environment, spending drops significantly.
Inflation may peak in Q2 this year—we’ll start seeing signs of slowing growth and deflation. I think this is exactly what Western central banks need. Without creating such deflation, they can’t truly escape their current predicament. This might eventually lead them to redefine CPI baskets, trying to steer people toward buying different things.
Either way, they can’t truly resolve the problem of bloated central bank balance sheets and negative-yield debt. The only solution is printing their own currency.
Hasu: What do policymakers really want—deflation or inflation?
Su Zhu: Policymakers now want deflation, but they want to achieve it by scaring consumers so they won’t spend too much. They want to suppress demand fundamentally—discouraging indulgence, preventing people from buying used cars priced 80% higher than last year, or unaffordable new homes that push mortgage rates up. They want to frighten everyone into consuming within their means, staying disciplined. They don’t believe inflation will persist for three years—they think it’s temporary.
Hasu: How do you define stagflation?
Su Zhu: Stagflation means economic slowdown, recession, low growth, but higher wages and rising prices. The 1970s were similar: soaring oil prices drove inflation, commodity spikes triggered recession.
I think population dynamics are the key difference—now almost no one enters the workforce, whereas in the 70s, massive labor influx occurred. Uncertain if we can dominate commodities now, but I know many buyers are those who can’t afford them.
For example, you earn $30K annually. Suppose you spent $25K on a basket of goods. Now it costs $50K—you won’t pay, because you don’t have $50K.
Media loves talking about inflation—it brings attention. Clearly, we have inflation now, which angers people, but long-term deflation is harder to grasp, a reality Japan has faced for over 30 years.
Stagflation is very dangerous. Many have mortgages—if jobs vanish and rates spike, some face proper bankruptcy cycles, which will be painful.
Hasu: How likely is a recession?
Su Zhu:Personally, the economy won’t enter recession unless the Fed forces it. That’s not their goal. Meanwhile, the U.S. is aggressively fighting inflation.
China understands better than anyone that they’re heading toward large-scale, long-term deflation, because public fertility is around 1.1—or possibly below 1. They have severe housing issues—their price-to-income ratio is the highest globally. Essentially, six people save for one house: four parents plus a couple. With insufficient newborns and immigration to buy homes, prices keep being told to rise—forcing the government to print money to prop up the market. Long-term, due to persistent deflation, they won’t see much inflation either.
The only issue is whether they can manage food price increases during this period. Since most food relies on fertilizer, food prices are inflating. Russia and a few others control nearly all global ammonium nitrate supply—so almost all agricultural prices are again at historic highs. If war ends or a ceasefire emerges, this could shift quickly.
For a third world war, such things are temporary. The current situation mirrors markets—short-term extreme fear over war, uncertainty about immediate changes. Long-term, people will see entirely different issues.
Hasu: Why are you focused on this? Is it because crypto has felt dead over the past three to six months? Or are you now looking at macro trends, believing they matter to all crypto investors? Earlier you compared crypto to tech stocks—do you think crypto outcomes depend entirely on macro developments?
Su Zhu: Crypto is entering a major league phase. People wonder: When should I hold crypto? What world events should I trust? What kind of world am I investing in? What developments might hurt my portfolio? Which ones help?
Personally, deflation isn’t that important for crypto itself, because crypto is still early—these macro forces aren’t strong enough to impact crypto’s total market cap. was essentially studying market psychology—how people decide whether to hold Bitcoin or Ethereum, and what they believe needs hedging.
Beyond macro, the truly interesting recent development is the geopolitical impact of Ukraine and Russia. What we’ve seen is that people previously criticized crypto’s speculation and disruption as dangerous. Now they’ve changed tone—they only debate how disruptive it is, or whether it makes the internet world better or worse.
I have two perspectives on this:
1. Crypto makes the internet world better. Ukrainians used it to receive and send funds. They accepted donations and converted them into supplies, while Russians could leave with some of their wealth.
2. We’re in an unprecedented era: People always debate whether things should happen. They discuss whether Putin should invade, whether he should go straight to Kyiv, etc. Focus less on whether it should happen—focus instead on what happens next.
Both Ukraine and Russia are now doing more with crypto. Russia has taken extensive measures in mining, discussed using Bitcoin for oil and gas trade, and talked about issuing digital assets. Ukraine minted many NFTs and carried out numerous initiatives.
Additionally, crypto developments in the Middle East are fascinating because they support alternative parallel financial systems. The West supports such systems too. But the Middle East version is better—it’s a credible neutral system.
We believe in a multipolar world order. We don’t think the U.S. can sanction individuals or manage global order. Geopolitical moves are rational responses to actual and expected developments.
Hasu: Is this something you learned from chess, poker, or other games?
Don’t waste time thinking about the past unless it informs the future. I like your view on multipolar world order and the Russia-Ukraine conflict. Many think it’s good that the West froze Russian central bank and oligarch assets. But I feel this could increasingly be used as an argument against crypto—I don’t know how to respond. What’s your take?
Su Zhu: Let me answer from my position. A protocol founder or someone at a Silicon Valley fund might struggle to share this view. As a Singaporean in Singapore, I see two distinct issues:
1. Who do these sanctions actually affect? For example: Sanctioning certain people happens because we can’t arrest them, as they haven’t committed crimes. So when we talk about London sanctioning Russian oligarchs, they’re not in jail because no law allows imprisonment.
Some violate laws, but in many cases, sanctioning individuals who haven’t contacted Putin in 15 or 10 years is unwise. That’s why only a few oligarchs’ assets end up frozen. Few oligarchs’ assets are frozen in the U.S.—they have lawyers defending them, rendering sanctions meaningless.
2. What boundaries must not be crossed? You can’t kill war criminals’ children.
Crypto can absolutely be used for sanctions—you know sanctions are everywhere. Crypto is currently in its infancy—many countries lack regulatory rules. It’s a dangerous topic, as governments are actively writing crypto regulations now.
We should treat crypto like the internet or cash, allowing appropriate space. Each country will answer differently based on their priorities. For instance, India didn’t comply with sanctions, still trading oil with Russia. Interestingly, some Indian households doubt U.S. sanctions, believing they’ve never worked—ineffective in Iran, Venezuela, North Korea. For them, compliance risks survival, as they need Russian fertilizer. The U.S. still buys Russian oil post-sanctions.
Multipolar nations fear Western reactions—they don’t know what comes next: WWIII or collapse of international order. Countries outside the U.S. have questioned sanctions: How long will they last? How are they decided? How do we weigh their impacts?
As wheat prices rise, Syria may go bankrupt—many countries like Egypt could end up highly unstable. What obligation do developing and poorer nations have to follow Biden’s sanctions? UAE and other Middle Eastern states say: I don’t want to be part of these sanctions, and I know you won’t secondary-sanction me because I see you buying oil from Iran and Venezuela.
The West may win short-term—Ukraine might get better terms in deals with Russia. But long-term, nations will reduce dependence on existing financial systems—some adopting credible neutral technologies, others building alternative systems—though the process will take years.
The West will continue adopting crypto as an expression of liberal values—as free speech and monetary freedom. Governments outside the West will adopt it too—savvy players call it a reliable neutral currency, a trustworthy neutral platform for transactions.
Crypto will become everything. I’ve been reading "The Sovereign Individual," where the concept of “super-political power” perfectly explains crypto. Peer-to-peer encryption is a “super-political power,” like the printing press—impossible to ban.
The book gives an example: After the Dark Ages and feudalism, the invention of horseshoes allowed some farmers to equip horses, make metal weapons and armor, dominate neighbors, centralize agriculture—eventually enforced by the Catholic Church.
Around 1500, the printing press and ships transformed power from feudalism to merchant rule. This happened because technology’s “super-political power” changed capital’s nature. Though land was precious, its value declined relative to financial capital—people printed pamphlets, realized so much was happening elsewhere, making land suddenly less valuable.
The printing press harmed the Church, weakening its power—so the Church tried to ban it, but clearly failed.
In the 90s, cryptographers invented peer-to-peer encryption. The U.S. military said it should be restricted to military use, banned externally. But professors argued it was just code, text—and ultimately, the technology leaked out as text.
Hasu: Compar
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
