Arthur Hayes: The Next Bull Market Will Be The Biggest One You’ve Ever Seen (The Full Picture)

He's the maverick of modern finance,

co-founder of BitMEX, former Wall Street

trader turned crypto visionary, and one

of the most influential voices in

digital markets today. Known for his

bold takes, deep macro insights, and

unfiltered commentary, [music] Arthur

Hayes doesn't just predict the future of

finance. He helps shape it. Just like

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Now, sit back, relax, and enjoy today's

show. All righty, Arthur. Good to have

you back, man. Uh, welcome to the bull

market.

>> Let's go.

>> Let's get it. We're up. We're alive. Uh,

vibes are back. Onchain is going

berserk. Majors are ripping.

Institutions and AI bros are still

sidelined. And here we are. Um, I was

actually just out at Jackson Hole last

week and I was there for the Fed meeting

and you know let

>> Yeah, I don't know how it was quite a

movie experience. I don't know how I did

it. You know, I was hiding out just in

my hiking gear actually. I was like, is

there an event going on here? Anyway,

Wars comes out with the rhetoric about

two hikes in the like the very beginning

about two hikes in Jackson Hole that

he's done. One being very hard, one

being very chill. And the market

responds this week absolutely ripping.

Where are we at in the macro state,

Arthur? We got uh Scott Bessant doing

his thing. Worsh doing his thing. What's

your read on the macro?

>> So number one, Worsh is irrelevant. It

doesn't matter.

>> Uh and I know he gave that speech what,

two weeks ago, week ago, whatever it

was. And what really happened, I think,

last night and going in is it's, you

know, euro euro yen. I wrote a whole

piece about this and this is my new

hobby horse, right? And it's usually

Japan has something to do with

everything in global financial markets

in this uh modern era. So basically

starting in mid July, late July what it

was, Ministry of Finance person Kayyama

in Japan basically stated that domestic

institutions and she was really saying

the GPIF which is the largest pension

fund in Japan, quasi government

institution need to re-evaluate their

ownership criteria and own less foreign

assets and buy more domestic Japanese

assets. Now she said this at the time

Delian was I don't know 162 163 and

everyone's like okay great we all agree

but like what are you going to do about

it? Is there going to be some sort of

impetus from the government to force

this to happen. The last time there was

a major change in the asset allocation

of GPIF and then downstream everyone

else follows that's individuals as

businesses was in 2012 AB prime minister

um Abbe came out and said this is

Abnomics which is just printing money

and we want the GPIF to change their

asset allocation to favor foreign

securities more than domestic right and

it took him two years to get the formal

agreement from the GPF ministers and

basically what he did is he had stack

the deck, remove the people who were

obstinate, put his own people on. It

took two years and then the GPIF came

out with their framework on how they

would um own more foreign, less

domestic. And then you see the market

start taking off. DY Yen weekends, you

know, Japanese people just start

investing abroad, everyone else follows

on, right? Whole thing. So this time

around, I was like, "Okay, well, great.

GPIF in two to three years might start

selling US treasuries and and buying

GTBs." Cool. Whatever. Don't care. You

guys have been talking about this [ __ ]

for too too long. We're going to fade

this. Right. Then you have the the first

yen intervention where best sell euros

buys yen. Talks about how the FEMA repo

facility needs to be uncapped. Hint hit

war. Do your [ __ ] job. Lick my dick.

Do what I say. Right. And uncap that

caret party limit to to be uncapped. And

then people like the GPIF can

essentially instead of selling

treasuries, they can get a loan from the

Fed. The Fed prints dollars. They take

the dollars, they sell them in the forex

market, they buy Japanese yen, they come

back to Japan. Great. Okay. Again,

another piece of the puzzle, but

somebody else still needs to do this,

right? Wars need to still call the

financial subcommittee. They still need

to agree to do this, right? Then we have

the the Treasury buyback upside. Hey

guys, I'm going to increase the Treasury

buybacks by 20 billion. I'm really

really serious. Okay, who cares? Four

trillion 40 trillion debt market. Not

really something going on here. Okay.

And and then Besson comes out last week

or earlier this week saying, "Hey BJ,

you need to raise rates faster than you

have been doing." Again, not like no one

has said this before.

You're not the BOJ, Bessant. Like, what

are you going to do about it? And then

we have sort of the the G 20 this week

meeting. I don't know where it's where

it's it's happening, right? And you can

assume that something happened, some

agreement happened on the sidelines

where I guess they finally got the

[ __ ] message. Bloomer reports

yesterday in Asia time that GPIF had an

unscheduled meeting in August, right?

August is a holiday month in Japan.

Japanese, you think Americans don't like

doing work on the holidays? [ __ ]

Japan don't do work on a holiday. Nobody

does [ __ ] on the holiday, right? And so

the the fact that they called this

unscheduled meeting, we don't know what

they talked about is during the G20

after the government told them to buy

more Japanese stuff. Besson, you know,

their security daddy is telling them to

buy more um Japanese stuff and sell

American. They have this unscheduled

meeting and then dollar yen goes from 60

to 55 in a trading session. It's this

ungodly massive move. Dollar, you know,

Euro JPY loses like three big figures

during Asian trading. Um so I think that

they there's going to be an announcement

soon that number one either FEMA repo

facility has increased the cap right

that GPIF has undertaken to change the

essentially waitings of foreign and

domestic um stuff and obviously crypto

and everything overnight woke up to this

and you get this sort of waller speech

about oh hey inflation's not so bad

maybe you know we shouldn't be be hiking

rates so you put all this together and

it's like, okay, we want to weaken the

dollar and strengthen the yen. Like this

has been the number one goal of the

Trump administration, right? They want

to re revamp this trading architecture

globally. Number one thing you need to

do is yen needs to be stronger. It's the

most undervalued currency next to the

yuan, but they can't really do anything

to China where they can do stuff to

Japan because they depend on the

American security umbrella. And so this

is why I think crypto ripped because

we've seen we've been digesting all of

the inputs and finally something has

happened. Something has to have changed.

You don't just move, you know, from 160

155 on no news given all these things

that have led up to this. And so that's

why I think that it's game on. And then

you get sort of crypto and all these

other things ripping overnight when the

S&P was what flattish um to down. You

know, tech's not really doing that much

in terms of the AI trade. like this is

all a liquidity story and I think we're

going to you know over the next days and

weeks there's going to be reveals okay

this is what was actually agreed at the

G20 and it's as we thought there will

going to be things put in place to

essentially print dollars to dump the

dollar and pump the yen

>> love it absolutely love it and dump the

dollar means pump our bags so

>> correct

>> you know I think there's a lot to dig

into but one of the things that I didn't

see mentioned in your latest piece.

Obviously, Japan is sort of like part of

this whole story in a big way. And a lot

of times when people think about Japan

and the yen, they think about this carry

trade or this basis trade. Can you just

tell us like is that relevant to the

story that you're describing? If so,

what are the implications for that? Cuz

people are saying that as the yen does

what it's doing, this is what breaks.

So, the Japanese society, I call it

Japanese Inc., they run the biggest yen

carrier trade globally, right? And so if

you take a look at the actual

consolidated balance sheet of Japan and

you include the the assets of the

private sector, essentially what they

have been doing is printing yen and

buying foreign assets. And so as the yen

weakens and your US tech pumps and you

know all these different things that

they own, right, versus appreciating

yen, Japan as a whole does very very

well. I know people want to focus on

this like one metric debt to GDP and all

this, but like you need to think about

Japan as one whole entity. As much as

they say that they're this capitalistic

society, it's a very communal socialist

society and they just have this veneer

of capitalism because America runs the

the country essentially. Um but at the

end of the day, that's not how Japan

works. There is Japan Inc. and this is a

global or a countrywide trade. they have

the largest carrier trade um

participants and so when the GPIF has

been instructed to go the other way now

Japan is going to go okay cool now it's

time I sell my bonds I sell my stocks I

sell the foreign currency I buy the yen

I bring back the yen I invest in JGBs I

invest in local companies I invest in

local real estate right this is what the

the directive has been from the

government yes it takes a little bit of

and to get going, but once it gets

going, you don't want to be in front of

that train. Now, the problem for the US

is that they owned all these assets and

they pumped the markets for the last,

you know, 30 years. So, how do you sort

of unwind that trade when your entire

empire depends on this financial tax

that you charge people for the stocks

going up and for the amount of debt that

you issue? Well, you basically say,

"Okay, I'm willing to print money and

run the opposite run the same trade

Japan said. I don't care if dollar goes

to 200. I guess want to reflate my

economy and basically inflate my way out

of this property bubble that I had in

the 1980s. So the US says, okay, I don't

care if DXY goes to 50. I just need to

become an industrial powerhouse again

and I need to reduce my DUT DDP by from

100 to to 30 back where it was um after

the last time they did this. Right? So

that is it's the same trade. It takes a

long time, but once it gets going, then

you can't really be in front of these

moves.

>> Then Arthur, one of the things that War

said, and I know that, you know, you

said he's kind of irrelevant here at

Jackson Hole was AI, AI, AI, this

disinflationary AI, AI, you know,

innovative tech. And then at the end of

the speech, he goes on to say about all

these inflation concerns. He's he's all

over the place, right? But the key here

is that people are talking about this

rotation. And what you're describing

here is the beginning of a broader

rotation that we were in very

accommodative financial policy postcoid

like extremely accommod I mean overly

accommodative right obviously for the

last four years we've been in higher

interest rate environment QT only ended

I mean sixish months ago if you look at

the actual balance sheet it flattened

out and you know started to kind of

actually go up. So the broader macro

shift here that I think is what you're

kind of hinting at with this Japanese

yen situation is that the US financial

policy is entering into the more

easing/accommodative

policy frontier or regime and it really

hasn't been like this since co is that

like the right way to think about it

obviously different scales here but like

really on the macro picture are we kind

of exiting that restrictive you regime

into a more accommodative one

>> restrictive. The the monetary situation

was only restrictive from let's call it

December 2021 until October 2023. That

was restrictive. Um then once Bad Girl

Yellen started issuing more bills and

bonds and drain the reverse repo

facility of 2 and a half trillion, you

know, it was rockstar time again for all

of us crypto and asset holders. And then

obviously the as you said the AI trade

is their sort of get out of jail or free

card. It's like hey you know we really

printed a lot of money over the last 50

60 years and you know under normal you

know math this exponential increase in

uh interest bearing cost and and the

size of the debt it would practically be

impossible to grow our way out of it.

But we've got this magical new thing

called AI. And you know, if we just do

AI and we we win the AI war against

China, then all of a sudden all this

debt's just going to disappear and we're

just going to be so productive and all

this, you know, yada yada yada. It's

great, right? And so this is why Wars,

Trump, Bessant, every everyone is AI,

AI, AI, AI because this is the only way

that they can basically sell to the

voters. It's like, hey, don't worry

about how much money we're spending.

Don't worry that we're spending more

money um per point of GDP than any other

time other than a war or a pandemic,

right? Don't worry about that cuz we got

AI and we're going to win AI. What the

[ __ ] does AI even mean? Like these

[ __ ] don't even know, right?

They just got sold some [ __ ] dog [ __ ]

by Dario, Sam, and Elon and they said,

"Okay, we need a bunch of debt. We need,

you know, government cover. You know,

AI, AI, AI. It's going to solve your

problems. Sell this [ __ ] to the public."

I said, "Okay, cool. Whatever."

And the AI thing feeds into the same the

same sort of trade, which is if AI is

their only way of saying this is how

we're going to solve the deficit issue,

don't worry about spending. Then if

these AI companies come under pressure

because the unit economics of these

large labs don't actually make any

[ __ ] sense, then what do they do?

They bail it out. What do they do? How

do they do that? They print some more

money. So it's the same trade. Say, you

know, the Japan trade architecture

European thing that's going to print

some money. And then the AI cut save

your face because you essentially just

blew few trillion dollars on a [ __ ]

hallucinating chatbot. Like that is also

going to be the reason why you pump a

bunch of money into the markets. So we

have these two things together which are

really going to to help crypto go to new

highs.

>> Yeah. And then just one thing that that

I like to throw your way because I know

Rob's got a ton of things on the macro

side and market side is in the last I

don't know six to 18 months the fiat

debasement trade like angle for Bitcoin

was dead. I mean it it did not perform

well but gold did and tech absolutely

demolished all markets AI capex memory

all these little things but the shift

that you're describing seems more

favorable to gold bugs and bitcoiners

and fiat debasement type of assets

versus outright tech assets. Is that

correct?

>> Yes. And I think right now we're

starting to the my friend just sent me

the new cover the economist and it's

like Jensen is this magic Jensen the CEO

of video is this magic wizard and Nvidia

no there's no cash flow problems here no

no there's no circular financing vendor

financing chicainery going on in their

accounting like Enron 2.0 I know, but

but an AI chatbot. No, no, no. None of

that's happening. This is the best

company that's ever existed. Okay,

great. That's the top of the market

there. Thank you very much. Let's

[ __ ] go. Cuz like when the economist

is telling you something, do the other

thing cuz they're a bunch of [ __ ]

muppets. Uh and so like like this is

like amazing. It's the best setup

because now the politicians can't not

spend the money because I would admit

that they made a large mistake and that

would feed into all this like data

center angst, this sort of,

>> you know, too much social media. The

tech companies stole our data. Like

you'd have to admit to all of that

stuff. If you say, "Okay, you know, we

we kind of [ __ ] up in AI. We got to go

a different way. Maybe we shouldn't be

government backs stopping this. you

know, we're not going to ban anything,

but like Elon and Co and earn your cost

of capital. There's no government

bailout for you. There's no like special

regulations. There's no like US versus

China nationalistic nonsense to like

make sure that we invest more money in

money losing enterprises. No, you either

make money or you don't. And please tell

us not your [ __ ] revenue numbers

anthropic. Like how much money do you

actually make? And if you burn money,

what are the uni economics on inference?

Me as a potential IPO investor in the

secondary market, right? Let's hear

about that. So I think this is something

that's never going to happen obviously

because that's not how politics works.

But it's that's why Bitcoin and gold and

these other assets do well is because

now you're in the capital wastage phase

where you're going to take a bunch of

printed money and throw it at all these

loans to roll them over to cover the

mistake that you made because you can't

admit that you blew a bunch of money.

>> So basically, you know, like the

politicians can't help us spend the

money. They spent it before on AI. M2

goes up, but none of that flows into our

bags, right? Crypto assets. And so you

know what you're saying now is that the

allocation of money into AI is

misallocation of capital that money does

end up flowing into digital assets.

>> Yes.

>> And is it is it the same is it like the

same investor class or is it just

broader macro investors, firms, funds,

etc. Obviously clarity is coming up.

Green light tokenization is all these

kind of sectors that are hot. Is it like

the same VCs exiting anthropic buying

Bitcoin or is it more of just like a

broader trend shift in your opinion?

>> This is just balance sheet expansion by

the central bank, right? And it's not

like I can't tell you this person or

that person is going to be buying

Bitcoin. I mean, I think a lot of these

VCs are going to get [ __ ] torched,

right? Could they talk to talk to their

investors saying, "Oh, I'm up some

ridiculous amount of percent because I'm

in these these labs." Right.

>> Right. And

>> okay, maybe Anthropic goes public. They

need to get their [ __ ] together and get

like out there immediately because

there's too many people asking too many

questions right now, right? Open AI is

[ __ ] Like they need they need a

government bailout. They need some sort

of like merger. Like, you know, Sammy

boy is he's cooked. He's got to find

he's going to have to come up with some

like impressive financial engineering to

to get this turd off the line. So, you

know, it's all it's all Daario all the

time. Let's see if he can pull it off.

But I think a lot of these VCs, they're

locked up, right? If this [ __ ] opens and

then dumps like 50 60% and then

liquidity evaporates unless a government

bailout comes like I don't know how a

lot of these guys are going to realize

that DPI that they've been touting to

their investors. So like I don't see

this. I know this is not this is not

like oh the AI bros are going to invest

in crypto. The AI bros don't have any

money. They got some pieces of paper

that they'll give you like but they

don't have any money. And so like okay

maybe if the the central bank is pumping

the bags that way then they can get some

money and somehow exit and buy crypto.

I think just think of it as generalized

balance sheet expansion to cover up the

malinvestment. This is what Bitcoin was

created for, right? In 2009, what do

they do? Balance sheet investment to

cover up the malinvestment in housing.

Period. End of sentence. So, it's the

same thing but on a bigger scale. And

this time, it's AI debt.

>> Yep. Yeah. And so, you know, there's

kind of a lot of moving pieces, but

let's try to put it all together, right?

There's all the AI founders you

mentioned, Sammy, Daario, and and Elon,

right? They kind of had their time in

the sun. The government listened to

them. You know, Trump obviously is out

there. He originally started about

repatriating and preaching nationalistic

policies. Japan kind of took the bait.

Now they're repatriating a lot of

capital. Um, and then Bessant is out

here and he's, you know, trying to

finance the whole thing. So who controls

the narrative right now

in terms of

like you know from my perspective it

seems like Bessant. It seems like what

Bessant says goes in control here.

>> Is it you know is it Japan? Like who's

in control right now? Like it kind of

seems like Bessant is the one that you

know he's like all right Japan it's time

to rep you know you want to repatriate

now is the time. We're going to unwind

the carry trade. I get it. You need to

sell bonds. kind of seems like that's

going to go against my broader strategy,

but don't worry, we have Wars. He's

going to play ball. We're going to be

able to finance the bills. Like, I is he

kind of the one that's orchestrating

everything right now or do does it?

>> He's a firefighter. The market the

market sets the narrative. The bond

market 480 on the tenure sets the

narrative. JPY at 160

>> sets the narrative. And then Bessant is

the only capable lieutenant who can sort

of say, "Okay, here are a bunch of

spinning plates. Let me try not to drop

any." And so we're going to do a he do

heel deal here, deal there, whatever,

right? And so like it's they're

perfectly at the whim of the markets and

they're trying to do the best that they

can given all the imbalances that have

built up over the past, you know, post

World War II is really what this is is

coming down to. This is the culmination

of, you know, over almost 100 years of

things that have happened. Everything is

fed upon itself to get to where we are

today. And so yes, you know, the

individual politicians matter, but they

also don't matter because at the end of

the day, they can't beat math and

compounding interest. You just can't

beat it.

>> So that's who controls the narrative.

Now, who controls the money printer? Is

it the same person or is are these two

different people? The people who control

the narrative and the people who control

the money printer?

>> Um, I mean, technically speaking, Worsh

is the Fed chair and he controls the

balance sheet. He can print money,

right? But at the end, but the end of

the day, I think if you want some dry

weekend reading, there's a there's a

speech by former Fed chairperson Arthur

Burns called the anguish of central

banking and he was there's a 1979 given

in Czechoslovakia. I forgot where it

was, right? Um but he was the Fed

chairperson before Vulkar and sort of

has been excoriated by financial

historians as the man who let inflation

out of the bag and all this sort of

stuff. And the basically the point that

he's making is that like all of us Fed

chair people, we come into this job with

all these beliefs about sound money and

how we're going to safeguard the

independence of the Fed and all this

sort of stuff. But at the end of the

day, we are still appendages of the

American empire and the American people

vote in politicians who spend money and

have particular programs. Who are we to

go against that? And so as much as you

think that you're here to safeguard the

independence of the Fed and the value of

the dollar, you're really here to

accommodate the spending that the

American people have voted on. And so

you will always print the money, you

will always do what the president wants

you to do. And this is borne out in

history. Republican, Democrat, doesn't

matter. Doesn't matter what you said

before you came in the seat. When you

get in the seat, your boss always wants

you to print money in some way, shape,

or form. And so Wars, you know, was on

the board of governors up until I think

2011. supposedly quit in protest to

quantitative easing, talked a big game

for the next 15 years while he was in

the private sector and his opinion

didn't [ __ ] matter. All of a sudden

gets to the Fed. What does he do? He

launches a task force. Oh, that's really

sweet. You have a task force. Oh, what

is the task force going to do? It's

going to give you a report. Oh, report.

Oh, thank you. Thank you.

>> The [ __ ] out of here. Morris is a

[laughter] Morris is 6.

>> So you don't So you don't think he's

going to

>> mean handsome guy

>> and you don't think he's going to cut in

uh a couple in a week or two weeks?

>> I think he's going to hold

>> or excuse me, you don't you don't think

Wars is going to hike in two weeks?

>> No, I think he's going to hold. I think

that they're going to essentially, you

know, it's easy to it's easy to spin a

narrative of, oh, some third derivative

of some [ __ ] up [ __ ] government

metric on inflation that includes

nothing that people actually spend money

on is going down. down in a year-on-year

basis. So therefore, we can hold rates

steady. But at the meantime, nominal

growth is what, an 8% last quarter in

the United States. And so short on rates

at 3 and a half to 375. That's how you

do leverage balance sheet. This is

textbook. And so by holding, he gets

sort of, you know, hem and haw about, oh

yeah, we're being hawkish and this and

that. And then, oh no, this reserve

management purchases is not real balance

sheet expansion and quantitative easing

because this technical thing about the

repo market. you know, most [ __ ]

American voters don't even know what the

repo market really means. So, like, oh

yeah, okay, sure. Um, so I like that's

what he'll do. And then and Besson is

going to be over here essentially

spinning plates and trying not to have

[ __ ] blow up in his face.

>> I agree because he also said that he

hates forward guidance. He went on a

five-minute rant in Jackson Hole about

being anti-forward guidance. What's

ironic is that he started Jackson Hole

speech with a rhetoric about two

separate hikes in the physical format

that he went on. In my opinion, if he

hikes in a week and a half, it will be a

very clear or the market will see it as

forward guidance, right? The market will

be like, you literally gave two stories

about hikes, you were all hawkish and

then you hiked. You're you're doing

you're doing exactly what you said you

don't want to do. So, agree on that.

That's like left curve thought process.

You're on the right curve. So, you know,

happy to be in the middle here. But

looking ahead, let's get bullish here.

Let's get [ __ ] bullish. What does

this mean? are we all-time highs end of

the year Bitcoin? Are we ripping into

the first half of next year? We had Will

Clemente on big, you know, macro guy. He

basically said he's never been more

confident in the longer term in the

sense that like he's very confident that

the switches are being flipped and that,

you know, short-term volatility is going

to be here, but it's clear we're

shifting into this financial repression.

So, let's think, you know, bigger

picture here. Bitcoin, crypto, what's

the timeline and what is your outlook

here?

>> I mean, I think we can maybe breach the

all-time high by the end of the year,

but I think at the end of the day,

there's still they still can't give the

game away too much before the midterm

elections, right? The number one issue

from American voters is affordability.

That's what they care about. And so

Trump's got to somehow square the circle

on this one about how all these

accommodative things that his people are

doing is not printing money. And so I

don't really know if Bitcoin at 500,000

the day before the election is really

going to help him out too much. So

[laughter] as much as we would like that

to happen globally as people who own who

own crypto. So like on one hand the

structural factors that we've been

talking about necessitate printed money

and we know that's going to happen. But

on the other hand, you've got these

discrete political timelines that you

need to manage to if you're a US

politician and you can't have it be seen

that you are promoting the Fed printing

money because I think by this point in

time most Americans think the Fed is

this engine of inequality as Scott

Besson said in the Wall Street oped

Journal. Um, right. And so like there

needs to be this illusion that they

actually care about the purchasing power

of this currency that you make as an

American um taxpayer. So again,

I'm super bullish. I perfectly agree

with your former guest. But I would say

it's can be very very volatile

and it's you know probably rips and then

chop a chopa chop a bit you know maybe

decline a bit and then rips and these

sort of things as we sort of get step

step step step by step towards you know

this just money printing bonanza.

>> Yeah. Which

>> Rob says the oven is preheating right

now. Right. Like the money printer is in

the preheating phase. You know we

haven't put the food in yet. The pizza's

still in there. your girl still on the

couch waiting for the food, but it's

coming. It's coming. So Arthur, let's

talk your your portfolio, your your

positions. You wrote you took the

biggest position perhaps ever in

Ethereum. You still holding that longer

term outlook there? You know, our

audience is going to say that you're

just going to sell Ethereum on our heads

after the show. Prove them wrong. What's

your thesis here? How, you know, how

long are you trying to hold your

positions? What's your kind of

portfolio? So obviously, you know, I

think Ethereum is the most hated uh mega

cap shitcoin, right? At the end of the

day, if you want to strap on the most

risk outside of Bitcoin and not be

afraid that you're shit's going to dump

75% overnight because of some issue with

the protocol, that's Ethereum. And

thankfully, it's been the worst

performing mega cap coin over the last

cycle. Hasn't even out gotten past

5,000, its all-time high in 2021. So I

think the riskreward setup is great for

Ethereum which is why it's our larger

position going into this sort of

liquidity rally and we also own some

other things in the same sort of vein

but obviously much smaller size like

Ether uh Athena that sort of stuff.

>> Yeah. Uh and so I I I actually want to

build on a question that Andy asked

around the timing of all this and you

know also on the misallocation of

capital point that you made earlier. Um

cuz one thing that you said in your in

your latest essay was that, you know,

you were kind of explaining how Euroy

yen is kind of the one thing to watch

because it's the only number that is a

leading indicator of a short-term

increase in the pace of dollar liquidity

creation. And so I think all everyone

who understands the Bitcoin thesis

understands dollar liquidity creation.

It's the debasement trade. That is

everything. But shortterm increase in

the pace of dollar liquidity creation is

the second derivative. that is the

acceleration of money printing. And so

why I mean there's one question about

why the Euroyen is the leading indicator

of that. Um I that that's probably like

that's kind of the place to start. It's

like why is that the thing that is going

to tell us that they're going to start

increasing the money supply at a faster

rate?

And and also I guess the the second

thing in that is is you know Bessant

does a lot of signaling and the markets

are forwardlooking and so you know there

one of the things that he said in a

recent interview was like potential

energy and kinetic and so by him

signaling to the market that they're

going to do these buybacks on these

long-term bonds. you know, the the

market's going to frontr run that and

that's a ton of potential energy. And

so, do you think we're gonna end up in

like a, you know, buy the potential

energy, sell the kinetic when these buy

the rumor, sell the news type of thing

when this thing ultimately comes to

fruition? Or the kinetic is ultimately

going to back up what he's saying. and

we're we're going to see enough kinetic

money printing that is going to send the

market higher than it thinks is is the

amount of money printing we're seeing

based on the signaling. So obviously

right now you know we've increased our

positions and things in advance of the

Fed balance sheet rising at a very very

you know COVID like 2009 like yeah it's

still rising but it's not like going

nuts relative to the past right which is

why Bitcoin has really just gone from

like 63,000 to like 80. Okay cool

whatever don't care not a big deal. So

how do you overcome the optics issues of

the Fed balance sheet going nuts? You

need a you need a real crisis. What is

the real crisis on the on the yen side?

You know, long yen of the euro yen pair.

It is GPIF is selling [ __ ] You know,

Nura is selling [ __ ] Um, Mrs. Watanab

is selling [ __ ] right? Because the

Japanese government said, "This is what

you must do."

Okay? So, we need to lend them money.

So, they don't sell it. They just, you

know, repo it. That is one pillar of

balance sheet expansion that makes the

yen go up. What's the euro situation?

The repo market. The large French banks

led by BMP Pariba, Credit Agricult, and

Society General, they are 20% of the

repo market. This is from the Treasury.

If we get a Euro issue, the market

that's going to feel the brunt of it is

France because the Japanese own a lot of

French debt. If they can't sell the

American [ __ ] because, you know,

Americans got like 50 [ __ ] military

bases in their country, they can sell

the European [ __ ] what are they going

to sell? They're going to sell French

stuff first. They're going to sell

French OATS. They're going to sell

French bank debt. Now, as the situation

in France deteriorates, they cannot

print money legally under the

strictctures of the euro. But the new

politicians coming in are like, "Fuck

this. I am the president of France, not

the European Union. I am here to do what

the French people need, what the French

nation needs. The French nation needs

more money. The French nation needs to

devalue within the stricture of the

euro. So if I'm not going to leave the

euro, then I just tell the bank to

France to say, "Okay, [ __ ] it. I'm going

to do QE in France, which is illegal

under the EU's charter, but [ __ ] the EU.

I am here for France. I need to save my

bond market." And the EU says, "You know

what? I can print euros and save your

bond market, but you're acting real bad.

So, [ __ ] you, Le Pen. [ __ ] you, Milan,

because you ain't licking my [ __ ]

boots. So, I'm not buying your [ __ ] And

so, this is a self-feeding prophecy

where a soft fxit has to happen because

both sides are unwilling to compromise

based on the power structures that give

them, you know, a right to be. And

that's the short euro side.

And so if the French banks are exiting

the repo market, we already saw the the

Fed switch to quantitative easing in

December of last year to essentially

backs stop the repo market. The repo

market helps finance treasury bills. Who

issues the most treasury bills now?

Scott [ __ ] Besson. And so it's all

the same trade. So if euroy yen goes

from I don't know 182 to like 140 120

there is going to be some serious issues

in the French banking system that will

have to be fixed with printed money.

Printed money means the end of the euro

because you can't have France print

money unilaterally

and not have it come from the ECB the in

the center. And then if the French banks

are getting owned because they're like,

well, why would I want to be in France

if I'm going to get capital controls and

you know, I'm going to get just this

like pseudo euro lira, then

I need to exit the repo market as a

French bank. I need to concentrate my

capital at home. And therefore, the Fed

says, "Oh [ __ ] there's all this capital

that needs that this balance sheet that

I thought was there is no longer being

offered by the commercial banks.

Therefore, I must increase reserve

management purchases." And I'm already

doing it. So it's not as if and I can

you know wave my hands to talk about

duration and you know why it's not

quantitative easing why it's so

technical and you know hope that the

American people are just too [ __ ]

stupid to understand what I'm actually

doing and like this is how you print

money from the short euro side and this

is why I think the euroyen exchange rate

tells us that both of these you know

technical reasons why the Fed must

increase money very very quickly is in

play. Yeah,

>> that's what gets us to $250, $500,000

Bitcoin, not just like Besson talking

about what he's going to do.

>> Yep. Makes sense. Makes complete sense.

Um, and you know, it also has political

cover because again, they're

repatriating capital and they're doing

it for the good of France. So, yeah, you

know, it's going to fly with their

citizens. Um, and so, you know, then the

the the US is going to reciprocate and

and uh, you know, Bessing kind of seems

like he controls the economic narrative.

And I have a feeling maybe you nicknamed

him Buffalo Bill Bessant because he

issues a lot of bills.

>> No, no, it's from the Silence of the

Lambs. So, you know, Buffalo Bill, the

serial killer. He's a serial killer of

nations, right? You know, it puts the

dollars on its skin or gets the

sanctions again, right? You know, if you

deal with Iran, we're coming for you

like

[laughter]

>> too good. So Arthur just kind of closing

out then just to wrap the thesis give us

just kind of you know succinctly how

investors should be thinking about you

know a portfolio in this change through

this market structure. A lot of

investors are you know obviously in our

audience are cryptoheavy but a lot of

people left crypto for AI. A lot of

people got enthralled in the memory

trade and the capex and the trade. just

from the investor perspective to kind of

wrap this up, you know, how do we think

about positioning a portfolio for

success in this regime? Like it sounds

simple, you know, I think I can probably

have an intuition to your answer, but

think more kind of like portfolio, you

know, outside of crypto and including

crypto. How do you uh kind of set

yourself up for success?

>> And and Arthur, one of the things that,

you know, we've been talking a lot about

on this on this show is like portfolio

thesis, portfolio construction. It's a

barbell. On one side, we have hard money

scarce assets benefiting from the

debasement trade through accommodative

monetary policy. On the other side,

we've got onchain businesses actually

making money at decent fundamental PTE

that are benefiting from Trump up there

with industry leaders shaking hands in

CFDC innovation advisory committees

benefiting from the legitimization of

the industry. So part of I think what

Andy's asking is like which side of that

barbell is set to outperform?

>> Yeah. And then also just broadly like

other assets too.

>> Yeah. Yeah. So I think if you're an AI

person, you've made a lot of money in

AI. You made a lot of money in AI

because the rate of change or the rate

of change was very was very high in

2526. That's over now. Now we're, you

know, not to say that AI trades are not

going to go up. They're just not going

to go up as much because now we're in

the is was this a good idea to invest

all this money phase, which is usually

where things top out. Now, you could get

another 50, you know, 40 50% 60% rise in

the NASDAQ, but like Bitcoin's at a

million or gold's at, you know, 15,000

or right, some sort of defense, you

know, Exxon Mobile triples, right? Like,

so like I think AI goes up, but it

doesn't go up as much as other things.

And so, you know, pick those other

things based on your own sort of

intellectual biases. Obviously, I'm in

crypto. I think Bitcoin in this complex

is the fastest horse. That's an on one

side of of the bar. The other side is

okay, what happens when people believe

that the politicians will no longer

print any money. I don't think that

starts happening until sometime in 2028

when you start to have, you know, the US

presidential elections. And what I think

is going to be the narrative of the

opposition Democrats is,

hey, guess what? We're going to increase

taxes because, you know, all these rich

people made all this money, yada yada

yada. You know, you're poor. Inflation

went up. So, let's just raise some

taxes, right? Now, whether or not they

do it is not the point. The point is

we're going to be scared that they

they'll win because most likely they

will win because it's just a it's a

ping-pong sort of situation. And that

might be the oh [ __ ] maybe they're not

going to print as much money as I

thought. And then you want to be on the

other side of of the barbell.

>> Yeah.

>> Now, for me, I I have a large stake in a

volatility hedge fund that basically has

those types of trades, but in sort of

optionality terms. But you can construct

that with other types of businesses that

you believe um do well when the money

printer is turned off and you believe

that, you know, money will get tighter

again.

Yeah, we think about that the debasement

assets in crypto or sorry yeah that's

out of the barbell Bitcoin Zcash much

more reflexive right lot higher ceiling

but can be you know especially Zcash can

pull back hard hyperlquid etherfi some

of these others now that they're you

know through investor unlocks good

tokconomics buybacks higher floors

higher floors but probably lower

ceilings because fundamentals can only

stretch you so far you got to scale that

business to scale that you know stock

price or that token price and So that's

kind of how we've more or less thought

about it. I I got to say though, man,

the you know, we've done podcasts for

years now. And you know, with you and

the industry is firmly in the we have

something to show for ourselves camp.

That's why we're out of the bear, right?

Obviously, you got all this policy

stuff, but tokens are out of the bear

because we feel like we have something

to show for ourselves, right? We have

businesses, we have tokens that are

doing well, etc. And so just a new

industry, man. Um and a lot of the a lot

of the old heads, if you will, have

left. I mean, you know, they made their

bag and they're out. But it feels like,

and this is analogy that I've heard

from, you know, other folks, feels like

we're in the 2001 moment of the do-com

bubble after the initial big run up and

crash where you just kind of had these

assets that were up only for now has

been 25 years. And it's slow and it's a

grind and there's a lot of deep

pullbacks, but it feels like we're

entering that kind of maturation phase

of the industry. still going to be

cyclical, but it feels like the industry

is long in terms of its production and

exports and then hopefully, you know,

asset prices too. So, it feels like

we're, you know, this time's always

different, right? And it never is, but

um it does feel like we have a lot more

substantiative value in the industry

than prior.

>> Cool. Yeah, I hope so.

>> Well, [laughter] let's get it. Thanks,

Arthur.

>> Let's go.

>> So, good show, man.

>> So, where are you buying your Zcash

back?

>> Yeah, exactly.

That's that's that's that's a more uh

well hype again riskreward. I don't

think Hype has a good riskreward.

>> I'll see.

>> Not that it's not going to go up too,

buddy.

>> It's going to go up for sure, but like

is it going to go up faster than Athena

for the same amount of risk capital at

risk? Right.

>> I hear you.

>> I don't think so. So that that's my my

uh hyperlquid Zcash. We'll see how the

formal verification and all that sort of

stuff goes.

>> Yep. All right, Arthur. Thanks for your

time, man. Boom. Awesome show. [music]