Dialogue with Arthur Hayes: BTC will reach $100,000, BTC should not fall into the situation of Ethereum

Compiled edited by TechFlow

Guest: Arthur Hayes , Co-founder and former CEO of BitMEX

Moderator: Nic Puckrin , CEO of Coin Bureau

Podcast source: Coin Bureau

Original title: BTC ETH Prglace Prediction, SOL Vs. APT, Crypto Elections With Arthur Hayes!

Air Date: August 7, 2024

Summary of key points

• In this podcast, Nic Puckrin once again invited Arthur Hayes, a senior expert in the field of cryptocurrency, to discuss the current market dynamics and future investment opportunities. As the co-founder and former CEO of BitMEX, Arthur has profound and unique insights into the crypto market. In the show, he analyzed the impact of the fluctuations of the yen on the market and the role of the US Treasury in the political environment.

• During the show, Arthur discussed in detail the impact of the unwinding of the yen carry trade on cryptocurrencies and predicted the price trends of Bitcoin and Ethereum. He also discussed how the upcoming US elections may affect financial markets, emphasizing the importance of political factors in economic decision-making. In addition, Arthur also shared his views on Aptos and Solana, analyzing their potential in the Web 3.0 field.

• At the end of the show, Arthur made predictions for the future market and explored the développement prospects of Bitcoin L2 (second layer solution). He called on investors in the crypto industry to be more politically active to ensure that their interests are reflected in policy making.

What is happening now

• Nic Puckrin brought up the current market turmoil, particularly the volatility of the yen, the unwinding of the carry trade, and recession fears, and reminded the audience to consult a financial advisor when discussing investments.

• Arthur stressed that the trend of the yen is the most important factor in the current market and mentioned that he had written a paper on the Japanese economy.

Japanese Economy and Monetary Policy

• Arthur explained the impact of the U.S. Treasurys quarterly refinancing announcement on market liquidity. He pointed out that due to tax revenue, the Treasury reduced the issuance of short-term Treasury bonds in the second quarter, which led to a decline in market liquidity, which in turn affected the performance of cryptocurrencies. He believes that as the Treasury re-issues Treasury bonds in the second half of the year, market liquidity will gradually improve.

Unwinding of the Yen Carry Trade

• Arthur analyzed the working mechanism of the yen carry trade in detail, pointing out that the Bank of Japan (BOJ) supports this huge carry trade by creating yen. The scale of this trade has reached 25 trillion US dollars, making it one of the most important trades in the world. As the yen depreciated and inflation emerged, the Japanese people began to become more dissatisfied with the government, and the BOJ was forced to take measures to gradually normalize monetary policy.

Future Outlook

• Arthur believes that the unwinding of the yen carry trade is a structural process that is expected to continue. He is cautious about the BOJs future policies and believes that they will not easily return to negative interest rates. He also mentioned that US Treasury Secretary Yellen and Federal Reserve Chairman Powell may help the BOJ transition smoothly and mitigate the impact on the market by printing money.

Is the Ministry of Finance involved in politics?

The political nature of the Ministry of Finance

• When discussing the role of the Treasury Department, Nic mentioned the influence of Treasury Secretary Yellen and her role in the upcoming US elections.

• Arthur said the Treasury has always been a political entity, but the current political climate makes its market manipulation more apparent ahead of a key election date. He is confident that Yellen will do everything possible to support Vice President Harris re-election chances.

Monetary Policy and Elections

• Arthur believes that the Treasury and the Federal Reserve may use the already approved liquidity swap program to provide dollars to the Bank of Japan (BOJ) to help maintain market stability. He described a possible operation in which the Treasury would buy back U.S. Treasury bonds and stocks at a price that would not affect the market, and then provide dollars to banks and companies to encourage them not to sell these assets in the market.

Future Outlook

• Arthur pointed out that this operation could allow the yen to gradually appreciate without actually unwinding the carry trade, while continuing to drive the US market up, creating favorable conditions for the Democratic Party to win the election. He believes that this strategy may keep the market stable and bring benefits to the political world.

Cryptocurrency and Japanese Yen Carry Trade

The relationship between the yen carry trade and cryptocurrencies

• Arthur confirmed that some funds and cryptocurrency investors do invest in cryptocurrencies by borrowing Japanese yen, which is a common practice. He pointed out that many traditional hedge funds seek the lowest cost of funds, and if risk management allows, they will borrow Japanese yen and use these funds to buy crypto assets such as Bitcoin.

Cryptocurrency as an investment asset

• Arthur mentioned that with the inflow of yen loans, the liquidity of funds in the cryptocurrency ecosystem has increased. He also pointed out that the price of Bitcoin denominated in yen has risen a few days ago, which shows that this trading strategy is effective. If the Bank of Japan continues to maintain zero interest rates, then borrowing yen and investing in Bitcoin will be a very attractive deal.

Market liquidity and risk management

• Arthur further explained that when there is a large-scale de-risking across the entire financial ecosystem, investors tend to sell more liquid assets, such as cryptocurrencies, rather than those with lower liquidity (such as commercial real estate). He emphasized that the liquidity of cryptocurrencies makes it the preferred asset for investors during market turmoil.

Ethereum’s liquidity problem

• Nic mentioned the recent Ethereum redemptions and asked if this was related to the unwinding of the yen carry trade.

• Arthur believes that this may indeed be related to some large traders exiting the market, especially in the current market environment, many investors may choose to reduce their risk exposure, leading to changes in liquidity.

Altcoins, Bitcoin, and Elections

Crypto Market Seasonality and Bitcoin’s Performance

• Speaking about the “bull run” in the crypto market, Nic raised the question of whether Bitcoin will return to its all-time highs by the end of the year.

• Arthur believes that it all depends on the market conditions. He said that if the US stock market falls by more than 20%, it will attract great attention from the authorities, especially Treasury Secretary Yellen, because it may affect the upcoming election.

The stock markets influence on voters

• Arthur pointed out that wealthy baby boomers play an important role in elections. If they suffer significant losses in their stock investments, it could affect their voting behavior. He stressed that if a financial crisis occurs during the election, voters may become dissatisfied with the current government and even choose not to vote, which is a potential risk for the Democratic Party.

Government Revenue and Capital Gains Taxes

• Arthur also mentioned that the US government relies heavily on capital gains taxes to support its fiscal revenue, especially in states like California, where the performance of technology stocks directly affects the states fiscal situation. Therefore, if the stock market falls and capital gains tax revenue decreases, the governments fiscal deficit will widen, which will force the authorities to take action to stabilize the market.

Future market response

• Arthur predicts that if the SP and Nasdaq fall 20% by Friday and the market is volatile over the weekend, then some action may be taken over the weekend. If the market crisis subsides in the short term and the situation does not change much, then it may be necessary to wait one to two months until the market regains confidence in the fall. As the election approaches, the government may take more active measures to ensure that wealthy voters are satisfied with the market and thus influence the election results.

The relationship between cryptocurrency and politics

The Politicization of Cryptocurrency

• Nic mentioned that cryptocurrencies are becoming more and more important in the US political environment, even becoming a key factor in voters’ voting. He cited an article by Arthur about a scene he saw at a party in Ibiza, comparing how politicians are trying to win crypto votes to girls trying to attract attention at a party.

Political candidates’ interactions with the crypto industry

• Arthur believes that if the market has too high expectations for a candidates victory, this may bring risks. He mentioned that Trumps performance in the debate was very good, which increased his chances of winning voters. But with Biden replaced by Harris, Trumps chances of winning may decline, which may affect the confidence of the crypto market.

Strategy for the crypto industry

• Arthur pointed out that although both the Democratic and Republican parties will eventually take measures to support their voters, the crypto industry should be more proactive in asking political candidates to take action, rather than expecting them to deliver on their promises after the election. He suggested that voters in the crypto industry should ask candidates to take specific measures before the election day to gain their support, rather than hoping that they will do something after the candidates are elected.

Views on the future

• Arthur stressed that voters in the crypto industry need to clearly express their needs and use this to influence candidates policies in elections. In this way, the crypto industry can gain a greater voice in politics and ensure that their interests are reflected in policy making.

Cryptocurrencies and narratives that should be bullish

Optimistic about Ordinals project

• Arthur mentioned his recently launched Airheads project and was very optimistic about Ordinals. He believed that as the Bitcoin market recovers, Bitcoin holders will become richer and will seek digital assets that reflect cultural values. He emphasized that ordinals, as digital artifacts native to Bitcoin, are fundamentally different from traditional NFTs, which makes them uniquely attractive in the market.

Current market opportunities

• Arthur noted that the current low market sentiment is an excellent time to build a unique art collection. He encouraged investors to seek out original artworks that resonate with them and use this opportunity to demonstrate the potential of ordinal technology.

Focus on exchange tokens

• When talking about tradable altcoins, Arthur mentioned some undervalued protocols that are able to provide real returns to traders. He did not name specific projects, but stressed the importance of looking for protocols that can provide stablecoins or other cryptocurrencies. He mentioned that the valuations of many projects do not reflect their actual value, especially during the general market sell-off.

Aptos’ potential

• Arthur also mentioned his role as an advisor to Aptos and expressed optimism about the project’s collaboration with traditional financial institutions. He believes that Aptos’s application in the Web 3.0 space will drive its growth and predicts that in the next two to three years, Aptos will achieve an important change in market position.

Future Outlook

• Arthur said he and his team are writing a comprehensive model detailing Aptos’ potential and partnerships with large financial institutions. He will share more information at a conference in Korea in September and looks forward to revealing more at events between Korea and Singapore.

Aptos and Solana

Technology and market acceptance

• When discussing Aptos and Solana, Arthur stressed that although both use the Move programming language, he does not believe that technology itself is the key factor. He pointed out that what ultimately determines the success of a cryptocurrency is the actual usage and demand of users, rather than technical indicators (such as transactions per second). He believes that when financial institutions turn to Web 3.0, they are focused on how to actually operate on a public blockchain, rather than technical details.

Aptos’ Market Positioning

• Arthur mentioned that the Aptos team is actively working with traditional financial institutions to provide solutions so that these institutions can smoothly switch to on-chain operations. He believes that this cooperation will drive the growth of Aptos transaction volume and network fees. He emphasized that although technology may affect the decision-making process, for ordinary traders, the focus should be on the partnership with these financial institutions and how they use the platform.

Competition with Ethereum

• When talking about the competition between Aptos and Ethereum, Arthur pointed out that although Ethereum has a dominant market share in the issuance of RWA (real world assets), financial institutions choose blockchains mainly based on the functions they need. For example, how KYC (know your customer) works on the chain may affect the choice of institutions. If Aptos can provide a better user experience in some aspects, then institutions may be more inclined to choose Aptos.

Crypto Areas to Avoid

Avoid leveraged trading

• When talking about crypto investments that should be avoided, Arthur first emphasized the risks of leveraged trading. He pointed out that leverage should not be used unless investors can pay attention to the market and manage their positions at all times. Many investors may suffer significant losses when the market fluctuates, especially if they fail to monitor their positions in time. He reminded that short-term market fluctuations do not necessarily mean a decline in the long-term value of a project.

Thinking method for investment decision making

• Arthur mentioned that when facing losses, investors should consider whether to transfer funds to projects with better potential, rather than simply waiting for a return on investment. He believes that holding poorly performing assets may lead to opportunity cost losses. For example, if an investor loses money on a project, but at the same time there are other projects that may rise sharply in the next few months, it may be a wiser choice to adjust the portfolio in time.

Pay attention to the issuance time and market performance of tokens

• Arthur pointed out that investors should pay attention to the timing of the tokens issuance and market performance, not just the industry or narrative it belongs to. He said that many tokens were issued at a high market value but lacked a user base and growth potential, which will make them face challenges when the market recovers. He suggested that investors pay attention to new projects that have performed poorly in past market cycles but may perform better in the current market environment.

Avoid overestimated projects

• Arthur specifically mentioned that projects that have reached high valuations in the 2021 cycle may face greater risks if they currently lack corresponding users and growth indicators. Investors in these projects should consider gradually exiting and investing their funds in emerging projects with better performance.

predict

Bitcoin Price Prediction

• When discussing the future of Bitcoin, Arthur gave a rough target price, predicting that Bitcoin will reach $100,000. He mentioned that the price may fluctuate in each $5,000 range, and emphasized that changes in the market may be affected by a variety of factors, including economic conditions and policy changes.

Political and economic impact

• Arthur mentioned that the current political situation in the United States may affect the market, especially in the upcoming election. He believes that Vice President Harris is a slightly more popular candidate, but if a financial crisis occurs before the election, Trumps chances will increase. He emphasized that the performance of the market (such as the SP 500 index) and economic indicators (such as oil prices) will be important references for judging the election results.

Supporting the Bitcoin Ecosystem

• Arthur talked about his support for Bitcoin and explained why he participated in the Maelstrom open source funding program. He said that the success of Bitcoin is directly related to his wealth, so he hopes to enhance the Bitcoin ecosystem by funding research and projects. He believes that investing in the future of Bitcoin is the responsibility of every holder to prevent large financial institutions (such as Blackstone and Vanguard Group) from controlling Bitcoins dominance.

How to participate in the funding program

• Arthur provided information on how to participate in the Maelstrom Grant Program. He mentioned that those interested can apply for funding through the official website, all proposals will be evaluated by Jonathan Beer, and the grantees will be notified around September. He encouraged everyone to actively participate to promote the further development of Bitcoin.

Bitcoin L2

The potential of Bitcoin L2

• When talking about the sustainability of Bitcoin, Arthur expressed optimism about the development of Bitcoin L2 (second layer solution). He believes that L2 technology will bring more value to Bitcoin, especially when miner rewards gradually decrease and transaction fees need to be balanced.

• Arthur mentioned that he is serving as an advisor to an L2 project called Mezzo and believes that these technologies will enable smart contracts and decentralized finance (DeFi) on Bitcoin.

Security and availability

• Arthur stressed that while some core developers are wary of L2 solutions, he believes that security is the networks top priority. He pointed out that while some have criticized Ordinals as garbage and spam on the blockchain, this junk actually pays transaction fees, thereby supporting the operation of the network. He believes that similar ways should be created to allow DeFi applications to exist on the chain and pay for their use.

Avoid becoming Ethereum

• Arthur warned that Bitcoin should not fall into the same situation as Ethereum. He mentioned that when Ethereum dealt with the DAO hack in 2016, it hard forked to save the project, sacrificing its properties as a currency. He believes that Ethereum is positioned as decentralized computing, not currency, so the contradiction between the two makes its development challenging.

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