Arthur Hayes: BTC Will Reach $100,000, and Bitcoin Must Avoid Ethereum's Fate
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Arthur Hayes: BTC Will Reach $100,000, and Bitcoin Must Avoid Ethereum's Fate
Arthur Hayes believes Ethereum is positioned as decentralized computing, not as a currency.
Navigating Web3 tides with focused insightsCompilation & Translation: TechFlow
Guest: Arthur Hayes, Co-founder & Former CEO of BitMEX
Host: Nic Puckrin, CEO of Coin Bureau
Podcast Source: Coin Bureau
Original Title: BTC & ETH Price Prediction, SOL Vs. APT, Crypto & Elections With Arthur Hayes!
Air Date: August 7, 2024
Key Takeaways
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In this episode, Nic Puckrin welcomes back crypto veteran Arthur Hayes to discuss current market dynamics and future investment opportunities. As co-founder and former CEO of BitMEX, Arthur offers deep and unique insights into the crypto market. He analyzes the impact of yen volatility on markets and the U.S. Treasury’s role within the political landscape.
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Arthur dives into how unwinding yen carry trades affects cryptocurrencies, forecasts Bitcoin and Ethereum prices, and discusses how the upcoming U.S. election could influence financial markets, emphasizing the importance of political factors in economic decision-making. He also shares his views on Aptos and Solana, analyzing their potential in the Web3 space.
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At the end of the show, Arthur presents his outlook for future markets and explores the development prospects of Bitcoin Layer 2 (L2) solutions. He urges crypto investors to become more politically active to ensure their interests are represented in policymaking.
What's Happening Now
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Nic Puckrin highlights the current market chaos—particularly yen fluctuations, unwinding carry trades, and recession fears—and reminds listeners to consult financial advisors before making investment decisions.
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Arthur stresses that the yen’s movement is currently the most critical factor in markets and mentions he previously wrote a paper on Japan’s economy.
Japan's Economy and Monetary Policy
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Arthur explains how the U.S. Treasury’s quarterly refinancing announcements impact market liquidity. He notes that due to tax revenues, the Treasury reduced short-term Treasury issuance in Q2, decreasing market liquidity and negatively affecting crypto performance. He believes liquidity will gradually improve as the Treasury resumes bond issuance in the second half of the year.
Unwinding Yen Carry Trades
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Arthur details the mechanics of yen carry trades, explaining that the Bank of Japan (BOJ) has enabled these massive trades by creating yen. With a scale of $25 trillion, it’s one of the world’s most significant trades. As the yen depreciates and inflation rises, public dissatisfaction in Japan grows, forcing the BOJ to gradually normalize monetary policy.
Outlook
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Arthur believes unwinding yen carry trades is a structural process expected to continue. He remains cautious about the BOJ’s future policies, doubting they’ll easily return to negative interest rates. He suggests U.S. Treasury Secretary Yellen and Fed Chair Powell might use money printing to help the BOJ transition smoothly and reduce market shocks.
Is the Treasury Political?
The Political Nature of the Treasury
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Discussing the Treasury’s role, Nic brings up Treasury Secretary Yellen’s influence and her significance in the upcoming U.S. election.
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Arthur states the Treasury has always been a political entity, but today’s climate makes its market operations ahead of key elections increasingly visible. He firmly believes Yellen will do everything possible to support Vice President Harris’s re-election chances.
Monetary Policy and Elections
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Arthur believes the Treasury and Fed may use approved liquidity swap lines to provide dollars to the BOJ, helping maintain market stability. He describes a possible mechanism: the Treasury could repurchase U.S. Treasuries and stocks at non-disruptive prices, then distribute dollars to banks and corporations, encouraging them not to sell these assets in the open market.
Outlook
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Arthur points out this operation could allow the yen to appreciate gradually without fully unwinding carry trades, while continuing to boost U.S. markets—creating favorable conditions for Democrats in the election. He believes such strategies could keep markets stable and benefit political outcomes.
Cryptocurrencies and Yen Carry Trades
Relationship Between Yen Carry Trades and Cryptocurrencies
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Arthur confirms some funds and crypto investors do borrow yen to invest in cryptocurrencies—a common practice. He notes many traditional hedge funds seek the lowest funding costs, and if risk management allows, they’ll borrow yen to buy crypto assets like Bitcoin.
Cryptocurrencies as Investment Assets
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Arthur mentions that inflows from yen borrowing enhance liquidity in the crypto ecosystem. He notes Bitcoin’s price in yen terms recently rose, indicating the strategy’s effectiveness. If the BOJ maintains zero interest rates, borrowing yen to invest in Bitcoin becomes highly attractive.
Market Liquidity and Risk Management
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Arthur further explains that during broad de-risking across the financial system, investors tend to sell highly liquid assets like cryptocurrencies rather than less liquid ones (e.g., commercial real estate). He emphasizes crypto’s high liquidity makes it a preferred asset during market turmoil.
Ethereum’s Liquidity Issues
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Nic brings up recent Ethereum redemptions and asks if this relates to unwinding yen carry trades.
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Arthur believes it likely does, as major players may be exiting amid current market conditions, with many investors reducing exposure and altering liquidity dynamics.
Altcoins, Bitcoin, and Elections
Crypto Market Seasonality and Bitcoin Performance
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On the topic of a crypto “bull market,” Nic questions whether Bitcoin will reclaim its all-time highs by year-end.
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Arthur says it depends entirely on market conditions. He notes that if U.S. equities fall over 20%, authorities—especially Treasury Secretary Yellen—will pay close attention, given its potential impact on the upcoming election.
Stock Market Impact on Voters
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Arthur highlights that wealthy baby boomer voters play a crucial role in elections. Major losses in their stock portfolios could affect their voting behavior. He warns that a financial crisis during the election period might make voters dissatisfied with the incumbent government—or even deter them from voting—posing a risk to Democrats.
Government Revenue and Capital Gains Taxes
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Arthur adds that the U.S. government heavily relies on capital gains taxes for fiscal revenue, especially in tech-heavy states like California, where tech stock performance directly impacts state finances. A stock market decline reducing capital gains tax receipts would widen budget deficits, compelling authorities to act to stabilize markets.
Future Market Reactions
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Arthur predicts that if the S&P and Nasdaq drop 20% by Friday and remain volatile over the weekend, interventions may occur. If the crisis eases quickly, little may change initially—but if confidence isn’t restored within one to two months, the situation could persist into autumn. As the election nears, the government may take increasingly aggressive measures to keep wealthy voters satisfied, influencing electoral outcomes.
The Relationship Between Cryptocurrency and Politics
The Politicization of Cryptocurrency
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Nic notes cryptocurrency is becoming increasingly important in U.S. politics, even emerging as a key factor in voter decisions. He references an article by Arthur comparing politicians courting crypto voters to partygoers trying to grab attention at a club in Ibiza.
Political Candidates and Engagement with Crypto Industry
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Arthur warns that excessive market optimism around a candidate’s victory can pose risks. He notes Trump performed well in debates, increasing his odds of winning. But with Biden replaced by Harris, Trump’s chances may decrease, potentially affecting crypto market sentiment.
Strategies for the Crypto Industry
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Arthur argues that regardless of which party wins, both will eventually act to support their base. However, the crypto industry should proactively demand action from candidates instead of waiting post-election for promises to be fulfilled. He advises crypto voters to require concrete commitments from candidates before Election Day, rather than hoping for action after they take office.
Outlook
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Arthur emphasizes that crypto voters must clearly express their demands and leverage them to influence candidate policies. This way, the crypto industry can gain greater political voice and ensure its interests are reflected in policymaking.
Crypto Projects to Be Bullish On and Their Narratives
Optimism Toward Ordinals Projects
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Arthur mentions his recently launched "Airheads" project and expresses strong optimism about Ordinals. He believes as the Bitcoin market recovers, Bitcoin holders will grow wealthier and seek digital assets with cultural value. He emphasizes that ordinals, as native Bitcoin digital artifacts, are fundamentally different from traditional NFTs, giving them unique appeal in the market.
Current Market Opportunities
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Arthur notes that the current bearish sentiment is an ideal time to build unique art collections. He encourages investors to find original artworks that resonate personally and use this opportunity to showcase the potential of ordinal technology.
Focus on Exchange Tokens
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When discussing tradable altcoins, Arthur refers to some undervalued protocols that offer real yield to traders. While not naming specific projects, he stresses the importance of finding protocols that deliver stable or other crypto yields. He notes many projects are undervalued relative to their true worth, especially during broad market selloffs.
Potential of Aptos
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Arthur mentions his role as an advisor to Aptos and expresses optimism about its collaboration with traditional financial institutions. He believes Aptos’ applications in Web3 will drive growth and predicts significant shifts in its market position over the next two to three years.
Outlook
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Arthur says he and his team are working on a comprehensive model detailing Aptos’ potential and its partnerships with large financial institutions. He plans to share more information at a conference in Korea in September and looks forward to revealing more during events between Korea and Singapore.
Aptos vs. Solana
Technology and Market Adoption
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When discussing Aptos and Solana, Arthur emphasizes that although both use the Move programming language, technology itself isn’t the deciding factor. He argues that real-world usage and user needs—not technical metrics like transactions per second—ultimately determine a cryptocurrency’s success. He notes that when financial institutions move toward Web3, they care about practical operations on public blockchains, not technical minutiae.
Aptos’ Market Positioning
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Arthur notes that the Aptos team actively collaborates with traditional financial institutions, offering solutions to help them transition smoothly to on-chain operations. He believes these partnerships will drive growth in Aptos’ transaction volume and network fees. While technology may influence decisions, he emphasizes that ordinary traders should focus on institutional relationships and how these entities use the platform.
Competition with Ethereum
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On Aptos competing with Ethereum, Arthur acknowledges Ethereum dominates RWA (real-world asset) issuance, but institutions choose blockchains based on functional needs. For example, how KYC (Know Your Customer) operates on-chain could influence their choice. If Aptos offers better user experience in certain areas, institutions may prefer it.
Crypto Areas to Avoid
Avoid Leveraged Trading
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On crypto investments to avoid, Arthur first highlights the risks of leveraged trading. He stresses that unless investors can monitor markets constantly and manage positions in real time, they should avoid leverage. Many suffer heavy losses during volatility, especially when failing to monitor positions. He reminds that short-term price swings don’t necessarily reflect long-term project value.
Mindset for Investment Decisions
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Arthur says investors facing losses should consider reallocating capital to higher-potential projects rather than simply waiting to break even. Holding underperforming assets may incur opportunity costs. For example, if an investor loses money on one project while another surges in the coming months, adjusting the portfolio promptly may be wiser.
Consider Token Launch Timing and Market Performance
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Arthur advises investors to focus on token launch timing and market performance, not just sector or narrative. He notes many tokens launched at high valuations lack user bases and growth potential, making recovery difficult during market rebounds. He recommends focusing on new projects that underperformed in past cycles but may excel in the current environment.
Avoid Overvalued Projects
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Arthur specifically warns that projects reaching high valuations during the 2021 cycle, yet lacking users and growth metrics today, face significant risks. Investors in such projects should consider exiting gradually and redeploying capital into stronger emerging projects.
Predictions
Bitcoin Price Forecast
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On Bitcoin’s future, Arthur gives a rough target of $100,000. He notes price may fluctuate in $5,000 increments and emphasizes market movements depend on multiple factors, including economic conditions and policy changes.
Political and Economic Impact
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Arthur notes the current U.S. political landscape may affect markets, especially with the upcoming election. He sees Vice President Harris as a slight favorite, but if a financial crisis occurs before the election, Trump’s chances rise. He stresses market performance (e.g., S&P 500) and economic indicators (e.g., oil prices) will be key signals for predicting election outcomes.
Supporting the Bitcoin Ecosystem
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Arthur discusses his support for Bitcoin and explains why he joined the “Maelstrom” open-source grant program. He notes his wealth is directly tied to Bitcoin’s success, so he wants to strengthen its ecosystem by funding research and projects. He believes investing in Bitcoin’s future is every holder’s responsibility to prevent dominance by large financial institutions like BlackRock and Vanguard.
How to Participate in the Grant Program
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Arthur provides information on joining the Maelstrom grant program. Interested individuals can apply via the official website; all proposals will be evaluated by Jonathan Beer, with recipients notified around September. He encourages broad participation to advance Bitcoin’s development.
Bitcoin L2
Potential of Bitcoin L2
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Arthur expresses optimism about the development of Bitcoin L2 (Layer 2) solutions. He believes L2 technologies will bring more value to Bitcoin, especially as miner rewards decline and transaction fees need balancing.
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Arthur mentions he is advising a project called Mezzo and believes such technologies will enable smart contracts and decentralized finance (DeFi) on Bitcoin.
Security and Usability
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Arthur emphasizes that while some core developers remain cautious about L2 solutions, security must be the top priority for the network. He notes that although some criticize Ordinals as blockchain spam, these “spam” transactions pay fees that support network operations. He believes similar mechanisms should be created so DeFi applications can exist on-chain and pay for their usage.
Avoid Becoming Like Ethereum
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Arthur warns Bitcoin should not follow Ethereum’s path. He recalls how Ethereum hard-forked in 2016 to rescue the DAO hack, sacrificing its monetary properties. He believes Ethereum is positioned as decentralized computing, not currency, and this inherent conflict creates challenges for its development.
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