Arthur Hayes: ‘If They Go 50, That Will Be a Nuclear Catastrophe for Financial Markets’

BitMEX
co-founder
and
Maelstrom
CIO
Arthur
Hayes,
sat
down
with
Markets
Daily
host
Jennifer
Sanasie
and
Bradley
Keoun,
CoinDesk’s
Managing
Editor
of
Tech
and
Protocols,
to
share
his
insights
on
whether
a
Fed
rate
cut
of
25
or
50
basis
points
could
lead
to
financial
turmoil
or
a
short-term
rally.
He
also
explores
the
potential
ramifications
of
government
spending,
inflation
and
the
reliance
on
fiat
currency
systems
across
major
economies,
and
the
dynamics
of
bitcoin
in
relation
to
traditional
markets.
The
following
transcript
has
been
lightly
edited
for
brevity
and
clarity.

Jenn
Sanasie:

The
Federal
Reserve
meeting
is
happening
today
in
the
United
States.
What
do
you
think
we’re
gonna
see
and
how’s
it
gonna
impact
markets?

Arthur
Hayes:

So,
the
question
is
whether
they’re
going
to
do
25
basis
points
or
50
basis
points.
I,
at
a
high
level,
think
that
they
should
not
be
raising
rates.
I
believe
that
the
U.S.
economy
is
quite
strong.
If
you’ve
seen
the
GDP
prints
over
the
last
eight
or
nine
quarters,
it’s
been
consistent
growth.
The
U.S.
government
continues
to
spend
an
insane
amount
of
money,
which
is
keeping
economic
growth
at
a
very
fast
pace.
And,
obviously,
that
helps
with
the
re-election
chances
or
election
chances
of
Kamala
Harris
and
her
running
mate
which
I
think
is
the
goal
of
the
current
Democratic
administration.
So,
the
Fed
cutting
rates,
when
you
have
massive
government
spending,
you
have
inflation
that’s
above
their
target
–
I
think
it’s
a
mistake.
Inflation
is
going
to
accelerate
into
the
fourth
quarter
if
they
decide
to
continue
cutting
rates.
And,
I
think
that
the
response
is
going
to
be
if
the
markets
start
to
falter,
they’re
just
going
to
do
more
of
it
and
they’re
going
to
make
the
problem
even
worse.

So,
if
they
do
25
or
50,
the
markets
react
the
opposite
of
what
they
believe.
I
think
everyone
believes
that
the
markets
are
going
to
go
up.
If
the
more
they
cut,
the
more
the
markets
go
up
with
stocks,
bonds,
cryptos,
all
that
kind
of
stuff.
I
actually
take
a
contrarian
view
that,
you
know,
the
more
they
cut,
the
more
the
markets
are
going
to
dislike
that.
Maybe
one
or
two
trading
days
after
the
fact,
but
they’re
not
going
to
learn
their
lesson.
They’re
just
going
to
keep
doing
more
of
it.
So
we’re
going
to
get
a
very
quick,
cutting
cycle,
so
that’s
my
view.

Dig
a
little
bit
deeper
into
that.
Let’s
say
they
cut
rates.
How
do
you
think
the
markets
will
react?
And,
more
specifically,
how
do
you
think
the
crypto
markets
will
react?

So
I
believe,
and
I’ve
written
extensively
about
this,
that
the
most
important
macroeconomic
variable
is
the
dollar-yen
exchange
rate.
And
so,
the
dollar
exchange
rate
weakened
a
lot
because
the
BOJ
cut
rates
at
zero
or
negative,
and
the
Fed
and
every
other
major
central
bank
raised
rates
starting
in
March
of
2022,
so
the
differential
widened
a
lot.
The
dollar-yen
went
to
about
162
on
the
top
side.
And
then
a
few
things
happened.
The
Fed
signaled
that
it
was
ready
to
start
cutting
rates
in
the
summer
of
this
year.
And
the
BOJ
indicated
that
it
would
start
raising
rates
and
it
did
raise
rates
15
basis
points
on
July
31.
And,
we
saw
in
the
subsequent
week,
markets
were
down
10%
around
the
world.

If
the
Fed’s
gonna
do
25
or
50
or
however
many
basis
points,
it’s
gonna
go
down.
And
now
in
the
subsequent
meetings,
it’s
gonna
continue
to
narrow
that
differential.
Dollar-yen
will
continue
to
strengthen,
the
yen
strengthens,
the
actual
nominal
value
goes
down,
and
people
continue
to
unwind
positions,
which
removes
leverage
from
the
system,
stocks
go
down,
and
I
think
yields
go
up.
I
think
crypto,
sort
of
TBD.

And
so
what
do
you
think
about
Bitcoin?
Does
that
decoupling
happen
right
away
or
does
it
happen
some
other
time?

I
don’t
think
it
happens
right
away.
I
think
if
we
get
sort
of
a
massive
sell
off,
people
sell
what
they
can,
not
what
they
want.
Bitcoin
is
a
very
liquid
asset.
People
have
a
lot
of
illiquid
assets
on
their
books,
especially
if
you’re
an
investment
manager.
So
if
you
have
some
bitcoin,
you
dump
it.
If
the
basis
comes
down
even
further
than
where
it
is
today,
sort
of
that’s
the
difference
between
Bitcoin
and
futures
contracts.
You
see
large
hedge
funds
like
Millennium
and
these
shops
who
put
on
this
basis
trade,
starting
with
the
ETF
launch
earlier
this
year.
They
unwind
those
positions
and
sell
bitcoin
spot
into
very
illiquid
markets.
So
I
think
Bitcoin
goes
down
with
the
rest
of
the
markets.
But
quickly,
as
we
sort
of
see
a
financial
collapse
in
the
early
stages,
bitcoin
will
say,
‘OK,
I
believe
that
the
markets
will
respond
positively
to
more
printed
money.’
[Treasury
Secretary]
Janet
Yellen
and
[Fed
Chair]
Jay
Powell
can’t
afford
a
financial
collapse
a
few
weeks
before
the
election,
especially
if
they
want
Harris
to
beat
Donald
Trump.

And
not
to
dial
it
in
too
much,
but
bitcoin
is
currently
right
around
60
grand.
You
know,
if
we
get
50,
where
does
Bitcoin
go?
If
we
get
25,
where
does
Bitcoin
go?
Do
you
have
that
specific
prediction?

I
think
25,
no,
unchanged,
not
much
is
going
to
happen.
I
think
everyone
expects
25.
I
think
if
they
go
50,
that
will
be
a
nuclear
catastrophe
for
financial
markets.
One
or
two
trading
days
after
the
effect,
you’ll
see
a
massive
rally
and
everything
because
everyone
believes
that
the
more
they
cut
rates,
the
better.
But
I
actually
think
it
points
to
a
deeper
rot
in
the
global
financial
system.
And
that
will
come
through
in
much
more
depressed
prices
after
the
fact.

Samson
Mow
was
on
Markets
Daily
recently
and
predicted
that
Bitcoin
could
hit
a
million
dollars
in
2025.
That
video
saw
a
lot
of
reaction
from
the
CoinDesk
audience,
a
lot
of
engagement.
What
do
you
think
of
that
prediction?
Could
it
hit
a
million
dollars
next
year?

Sure,
but
I
don’t
think
it
will.
I
still
have
a
million
dollar
price
target.
I’m
more
of
a
2026,
2027
sort
of
person.
Next
year,
we
really
get
a
ramp
up
in
fiscal
spending
regardless
of
who
wins
the
U.S.
election.
And
if
the
U.S.
dollar
declines
a
lot,
then
China
has
room
to
enact
stimulus
as
well
and
keep
the
yuan
stable.
And
then
you
have
the
rest
of
the
major
central
banks
following
in
the
footsteps
of
the
Fed.
They
look
at
the
Fed;
they’re
easing
so
we
can
ease
too.
We
can
do
as
much
as
the
Fed
is
and
our
exchange
rate
isn’t
going
to
get
trashed.
And
so
that’s
what
I
think
happens
once
you
get
the
new
president,
whoever
it
is
in
the
U.S.
because
both
Harris
and
Trump
are
committed
to
spending
lots
of
money.
Trump
is
committed
to
cutting
taxes
and
Harris
is
committed
to
welfare
payments.

Arthur,
I
was
listening
to
a
podcast
you
were
on
not
too
long
ago,
and
you
were
talking
about
how
you
think
that
this
cycle
is
the
one
where
I
think
your
terminology
was
the
sovereign
debt
breaks.
And,
I’m
curious,
when
you
talk
about
a
cycle,
what
is
that
cycle
that
we’re
in
right
now?
How
long
is
that
cycle?

I
don’t
know
how
long
the
cycle
is,
really.
It
depends
but
I
believe
that.
If
you
think
about
the
global
reserve
currency,
the
U.S.
dollar,
and
all
the
wars
and
all
the
spending
that
needs
to
happen
to
keep
the
system
intact,
we’re
at
this
precipice
where
you
can
go
either
way.
You
could
have
a
sort
of
massive
austerity,
massive
deleveraging,
maybe
a
revolution,
or
the
authorities
can
try
to
keep
things
stable
by
fixing
the
price
of
government
bonds
and
printing
as
much
money
as
possible
to
placate
their
electorate,
whether
that’s
in
the
United
States,
that’s
in
the
EU,
that’s
in
China,
that’s
in
Japan.

The
question
is,
you
know,
can
they
continue
to
just
keep
things
going?

Sure,
and
Bitcoin
can
go
to
a
million,
to
$10
million.
Bitcoin’s
what,
$1.7
trillion
market
cap.
It’s
magic
internet
money
that
was
created
out
of
thin
air,
you
know,
starting
in
2009.
Bitcoin
is
the
antidote
to
what
has
happened.
Yes,
okay,
they’ve
printed
a
lot
of
money
globally,
the
U.S.
being
the
most
egregious
with
it.
And,
the
reaction
has
been
Bitcoin.
And
we
have
this
cryptocurrency
ecosystem
that
has
thrived
based
on
all
this
printed
money.
And
we
have
all
these
different
types
of
assets
that
are
created
and
have
value
because
we
have
such
a
fucked
up
financial
system.
So,
I
say
they’re
getting
away
with
it.
Bitcoin’s
a
smoke
alarm.
It’s
telling
us
that
there’s
something
wrong
here.

When
you
look
at
the
crypto
markets,
when
you
look
at
the
commentary
around
crypto
markets,
I
know
you
create
a
lot
of
your
own
content,
you
participate
in
a
lot
of
content
like
this
podcast,
what
are
people
not
talking
about
enough?

Patience.
I
think
everyone
is
thinking,
Bitcoin
needs
to
go
to
a
million
dollars
today,
next
year,
because
I
took
a
bunch
of
leverage
or
my
whole
net
worth
is
in
this
particular
cryptocurrency.
And
they
hear
the
things,
the
imminent
collapse,
all
the
debt.
They’re
asking
well,
why
isn’t
it
happening
yet?
Why
not
now?
I
see
all
these
things.
I
believe
what
you’re
saying.
It’s
super
fucked
up.
Politics
is
fucked
up.
Finance
is
f##ked
up.
And
why
isn’t
Bitcoin
responding?
Or
why
isn’t
the
crypto
that
I
own
responding?
And
I
think
it’s
just
patience,
right?

Arthur,
just
to
get
into
one
of
the
specific
market
factors
that
have
emerged
this
year,
which
is
all
these
ETFs.
You
were
actually,
you
previously
traded
ETFs
at
Citigroup.
So
would
love
to
hear.
And
again,
I
was
just
listening
to
this
other
podcast
where
you
were
talking
about
kind
of
the
role
of
the
market
makers
and
that
dynamic,
but
curious,
just
generally
speaking,
what
is
your
kind
of
big
take
on
what
are
the
implications
of
now
ETFs
being
kind
of
a
major
factor
in
this
market?

So
I
think
at
the
end
of
the
day,
ETFs
are
for
people
who
want
the
price
performance
of
Bitcoin.
They
don’t
want
to
own
Bitcoin.
They
don’t
want
to
be
their
own
financial
institution.
They
want
to
outsource
that
to
Larry
Fink,
BlackRock
and
all
these
other
major
institutions,
which
is
fine.
Bitcoin
can
do
whatever
you
want
with
it.

Right?
Live
in
New
York.
They’re
both
billionaires,
both
very
rich.
Why
weren’t
they
given
one
and
BlackRock
was
given
one
in
six
months?
Well,
at
the
end
of
the
day,
you
want
the
same
financial
institutions
to
control
the
wealth
that
can
ultimately
be
appropriated
by
the
government
at
the
flick
of
a
switch.
BlackRock
is
just
another
arm
of
the
U.S.
government,
just
the
same
as
any
other
large
Chinese
asset
managers
in
the
arm
of
the
Chinese
government.

If
people
don’t
use
Bitcoin,
it
goes
to
zero.
It
doesn’t
function
the
way
in
which
everyone
who
operates
in
this
industry
wants
it
to
function.
Talk
to
me
about
what
could
happen
in
the
future
there.
If
this
happens,
comes
to
fruition,
people
aren’t
using
Bitcoin,
what
does
that
problem
look
like?

It
looks
like
revenue
for
miners
goes
down.
It
looks
like
how
do
they
afford
the
capex?
Difficulty
adjusts,
that
kind
of
thing.
I
mean,
I
think
it’s
a
very
long
tail
sort
of
situation
if
we
don’t
have
any
use
cases
for
Bitcoin.
And
obviously
that’s
sort
of
why
I
love
Ordinals
and
Bitcoin
layer
2D
files,
these
sort
of
things.
Like
let’s
pay
the
miners,
let’s
do
something
with
this
thing
and
create
some
usability
for
people
so
that…people
are
using
it,
people
are
spending
money,
and
we
sort
of
take
this
problem
and
remove
it
as
a
problem
from
the
future.

You’ve
done
some
really
interesting
things
this
year
at
Maelstrom,
which
is
your
family
office,
your
investment
fund,
right?
And
you
launched
this
Ordinal’s
Inscription
series,
the
Airheads,
which
is
hilarious,
by
the
way.

Thank
you.
I
guess
I’m
a
flexi
-coiner,
an
avid
sh&t-coiner.
But
if
I
think
about
the
taxonomy
of
how
I
look
at
crypto,
Bitcoin
is
money.
No
other
crypto
is
money.
It’s
the
hardest
money
that
we’ve
created
in
human
history.
Bitcoin
cares
about
the
security
of
the
network.
Bitcoin
cares
about
an
immutable
blockchain.
Ethereum
is
not
money,
regardless
of
what
people
say.

They
decided
not
to
be
money
in
2016
when
the
community
allowed
a
hard
fork
to
happen
to
pay
back
the
DAO
hack
folks.
Ethereum
wants
to
be
the
best
decentralized
computer
ever.
And
it
is
so
far.
I
put
Solana
in
that
camp.
Obviously
I’m
a
big
Aptos
person
right
now.
They’re
also
trying
to
enter
this
sphere.
And
then
you
have
a
lot
of
other
applications.

They
want
to
do
something
on
one
of
these
networks,
decentralized
finance
is
something
I’m
very
passionate
about
because
I
believe
that
the
rest
of
the
world
should
have
access
to
financial
products
at
the
ease
of
going
on
the
internet
and
clicking
a
few
buttons,
which
is
not
really
the
case
for
most
people
out
of
the
United
States
and
Western
Europe.
They
have
pretty
fucked
up
financial
systems.
That’s
why
DeFi
makes
sense
for
those
folks.
So
I
like
all
this
stuff.
It’s
all
an
experiment.

You
know,
some
things
are
10
years
old,
15
years
old
Bitcoin,
and
other
things
are
less
than
a
year
old.
But
we’re
trying
to
sort
of
create
a
completely
new
system
and
give
anyone
with
an
internet
connection
a
choice
of
how
they
want
to
save,
how
they
want
to
invest,
how
they
want
to
express
themselves
culturally
over
the
internet.

And
for
your
NFT
collection,
like
why
you
chose
to
go
in
now
on
Bitcoin,
Ordinal’s
inscriptions,
what
was
that?
What
was
the
thinking
there?
Or
what’s
your
goal
for
that
project?

So
we’re
an
investor
in
Oyl
Wallet
and
there
are…

Yeah,
yeah,
I
met
one
of
their
guys,
by
the
way,
at
Bitcoin
Nashville
at
the
party
at
the
Parthenon,
talked
with
him
for
a
while.
But
anyway,
go
ahead.

Yeah.
So
we’re
an
investor
in
this
wallet
and
how
do
we
create
some
buzz
about
Ordinals?
Well,
let’s
do
an
Ordinals
drop.
Now
I
just
don’t
want
to
do
another,
you
know,
PFP
10
,000
AI
generated
collection.
We’ve
done
that
to
death.
So
what
can
we
do
that
is
specific
to
Ordinals
that
you
can’t
do
this
on
any
other
protocol?
So
that
was
something
to
do
the
recursive
inscriptions.
We
want
to
show
artists
and
creatives,
look
at
what
we’ve
done
here.
I
actually
don’t
care
what
happens
to
the
price
of
these
things.
I
just
want
to
see
people
be
inspired
to
do
other
things,
show
the
capabilities
of
the
Oyl
wallet.
Here’s
what
you
can
do
with
this
and
show
the
capabilities
of
ordinals.
What
sort
of
creative
minds
can
create
something
completely
unique
that
can
only
exist
on
ordinals
that
further.

Okay,
got
it.
Yeah,
that’s
really
funny.

That’s
really
the
goal.
I
mean,
of
course,
I
hope
that
all
these
airheads
are
super,
super
valuable
in
the
future,
but
really
the
goal
is
to
inspire
others
to
do
other
sorts
of
derivative
works
using
Ordinals
and
inscriptions.