The biggest problem for Bitcoin is not the war because we can look through that. It's this AI disruption, which continues to accelerate. And the result is that knowledge workers are getting fired. Pick a major company and they're saying, 'Hey, I am more productive using a team of agents than I was before. And therefore, my least productive engineers, accountants, lawyers, or the most junior ones, either I'm not going to hire them in the first place or I'm going to let them go.' And so that, I think, is a bigger problem for Bitcoin because that is a credit deflationary event.
All right, back on Coinage today, Crypto Twitter's favorite trader Arthur Hayes and founder at Maelstrom. Arthur, it's good to see you again. Thanks for coming back on, man.
Yeah, it's exciting. It's a weird time right now in the markets, obviously, because you've kind of got since the Iran conflict Bitcoin performing okay relative to other assets. And I know you're more of a macro trader, so maybe we just start there with kind of what you're making of what we've seen in markets both in crypto and in TradFi past few weeks.
Yeah, obviously, the big events over the last what is it, six weeks has been the US-Iran war. And obviously, I am not a general, never been in the military. I don't know all about military strategy. But for an investor, the only thing that really matters, which is unfortunate because there's lots of people dying on both sides, is whether or not commodities and oil are flowing through the Strait of Hormuz in appropriate quantities or not, right? And so that is obviously the only thing that matters. And the chart that I basically look at that I created on my handy-dandy Bloomberg is the spread between the first and the six-month WTI crude oil price because obviously, Americans only care about America. The only price index that matters for gasoline pretty much is the WTI oil. And that's what I'm sure Trump is looking at tick by tick in terms of what's going to influence him to negotiate or to keep bombing. And so if the back month futures are rallying and closing that spread, because obviously the front month jumped when the conflict started, then that means that oil is not flowing. The market believes that there's going to be some disruption that's going to last a long time and contractual arrangements in the back end are going to start getting bid up. And that's obviously very, very bad for the global economy, especially for anyone who consumes energy, which is all of us. And so that is the spread that I'm looking at. Now, it blew out as the war started because front month oil futures spiked up to like a high of about 120. And you know, before Trump reversed course a few days ago, it was something around 110 or 115 dollars.
They've stayed high, though. I've been doing the same. I've been looking at the Decembers and staying high.
Yeah. It's staying high, but the spread is narrowing materially because it seems that even before the ceasefire or whatever you want to call it, ships were going through the strait. Not as many as were, you know, pre-February 28th, but there were ships going through. There was an interesting Citrini report from an anecdotal analyst going out to the strait and taking photos and almost getting arrested. And I think the nuance point is that the IRGC generals want to make money. And they don't want the entire world hating them because they shut off their energy. And so they're like, 'Okay, well, we want to have sovereignty over this choke point. We want to get paid. You pay us in yuan, crypto, maybe some sanctioned dollars, we'll let your ship go through.' And that was before the ceasefire. And now after the ceasefire, it seems like the only headline that I care about is, is there an understanding between Trump and the IRGC that, 'Hey, we now own this strait. We're going to charge a bit of vig to get the ship through, but guess what, ships are getting through. So don't worry, America, all your allies aren't going to hate you because you essentially just crippled their economies for I don't even know why. And your voters are not going to have $6 gasoline come November.' And that's the only thing that really matters. You know, whether or not the genocide in Palestine and Lebanon and all over the Middle East continues at the hands of all the current actors, who knows? It doesn't really matter for markets. Is the oil going through? Are the fertilizers going through? How much are ships getting charged to go through? And that's all I'm looking at. And I think that's all markets really care about. And obviously, markets have rallied pretty aggressively even though the ceasefire looks pretty toothless. Both sides are still bombing each other.
Um yes, it looks shaky if you read... Shaky at best is what I would say. And I suppose on that front, too, because so much of this is tied to, as you said, kind of how quickly it gets resolved. And if it does stay higher, we have had a few other analysts, Moody's I think just boosted their prediction for a recession to about like 50%. Obviously, all this is tied to how long oil prices stay elevated. And certainly at the Fed, we hadn't talked about this last time because it was kind of out of the thinking, but like I think they're now the market's pricing in rate hikes for this year, which is kind of crazy to talk about. I mean, how do you consider some of the impacts and how it's changed coming into the year? Because I think you predicted that by midyear we'd start to get back into bull time for Bitcoin. But how does the macro picture change all this?
I still think that the biggest problem for Bitcoin is not the war because we can look through that. It seems like both sides have an incentive to keep some sort of status quo of energy flowing through the strait. It's this AI disruption, which continues to accelerate. The new Claude models that launched in late 2025 are starting to be integrated by lots of service providers and tech companies. And the result is that knowledge workers are getting fired. Pick a major company and they're saying, 'Hey, I am more productive using a team of agents than I was before. And therefore, my least productive engineers, accountants, lawyers, or the most junior ones, either I'm not going to hire them in the first place or I'm going to let them go.' And so that, I think, is a bigger problem for Bitcoin because that is a credit deflationary event. And we have all the central banks believe that the AI is a productivity miracle that's going to elevate GDP without increasing inflation. Therefore, they don't need to cut rates. They don't need to expand the amount of money going into the system. But the banking system is going to face big problems when you have advanced economies that are highly dependent on consumer spending and highly leveraged to that no longer have, you know, the highest paid workers have jobs. And unemployment insurance, at least in the United States, is very little compared to someone who makes, you know, call it $250,000 a year as a mid-level engineer at one of these firms. So I think that's a bigger problem. That's why Bitcoin went down from 126 to, you know, 60,000. That problem has not been resolved. And maybe Bitcoin rallies to 80, 90,000 on this move of the sort of relief rally after the war. But I don't see how Bitcoin can retake 100,000, get back to all-time highs until we solve this problem. And it's solved by a massive financial collapse followed by printed money.
I don't think I've heard many people take the take. I mean, I certainly I was on Yahoo Finance talking about kind of the problem around AI and employment that you just raised. But I don't think I've heard a lot of people compare that or pair that, should say, with why Bitcoin fell because almost everybody is talking about 10/10 and kind of what that did to everything around crypto. But you're saying it's more you think around employment expectations tied to AI.
Oh, I'm just... It's credit deflationary. The Bitcoin to me is the liquidity smoke alarm of the world. Bitcoin rises and falls with the amount of fiat credit liquidity. And right now, there's not enough fiat credit liquidity being created by central banks and the commercial banks to offset this massive deflationary impact that is AI in the transition from, you know, an old way of working to a new way of working. I'm not saying that everyone's going to lose their job. All I'm saying is in a highly leveraged economy like the United States, if you get 10 to 20% of the highest cohort of people who earn money, you know, tech knowledge workers, who have mortgages and credit card payments and car loans, right? And who go to Saks Fifth Avenue and buy the latest bag because the social media influencer told them that it's the hottest thing to buy, right? These are the folks that power the United States economy, who the banks have the debt on their balance sheets. And when they lose their job, you know, unemployment insurance is something like 30, 40,000 dollars a year and you were making 250, you can't consume in the way that you did before.
How does that change kind of the way that you look at kind of... because I think last time we chatted you were very much in the camp that the end of 2026 looks bullish for Bitcoin. Does that mean that you're not anymore?
It depends on how fast this is recognized as a problem. Obviously, the first crack is private credit. And we've seen Blue Owl and a lot of these major private credit funds have gated investors. Can't get their money back because they've invested in these CLOs of these software companies. And the market said, 'Oh, you run a SaaS business. And do I need a thousand-dollar a head of subscription when I can do it with an AI chatbot for a hundred dollars a month?' Of course not. And so then those stocks got hammered, you know, 30, 40, 50%. Blue Owl and those kind of guys got hammered as well. And then that was the first manifestation of this credit deflationary event. You know, Citrini published that report, whatever it was, two or three months ago. Everybody freaked out. So financials sold off. But then everything recovered. People kind of forgot about it because the war happened. But that has not been resolved. That is only accelerating. People are only getting better at using teams of agents to do work that humans were doing before and they're going to realize that their cost base can be massively rationalized and the market's going to reward them for it. Look what happened after Dorsey announced that massive layoff at the Block. His stock rallied 20%. And so, the management sees this and like, okay, well, AI makes my cost base cheaper, my P&L goes up and if I fire all these workers, my stock price goes up and guess what, I get to get paid a lot of money in stock. Fire all the workers. But these workers have, you know, loans. They've got car loans, they've got mortgages, they've got credit cards to pay. And I think that is the thing that people are forgetting is, yes, AI is a productivity miracle, but we don't have a society that understands how to share and that means that, you know, these workers are going to take that income out of the system. What are they going to do until we come up with a solution on how these supernormal profits should be shared between the companies that operate these AI models and use them and all the humans that used to do this work.
Yeah. I mean, we can certainly kind of shift into other opportunities too that you're focused on because I know Hype's one of them and it has been interesting to kind of see some of these plays break from Bitcoin and outperform them in a year when Bitcoin's down by 20% or so. And I guess one more point on that when you kind of pair private credit, it's also been interesting to kind of see Bitcoin hanging in relatively since the Iran conflict broke out. Same with ETH relatively to some of the assets. I wonder how much of that in your mind, because I've been debating this, is mostly just MicroStrategy buying, Strategy buying and Saylor now fueling some of those buys coming from Saylor that is explaining some of that outperformance and if that's the case, how shaky things actually look under the hood.
Or the fact that Bitcoin was down 60% before the conflict, but everything else wasn't. So, I think I wouldn't put too much faith in the fact that Bitcoin was up 4 or 5% but oil was at 890. I would have liked to have Bitcoin be up 90% then I could say, oh great, Bitcoin performs in line with your real cost which is hydrocarbons, but it didn't. It just outperformed everything else, but then, you know, the last six months it was down 60%. So, I mean, I'm not jumping for joy about the relative outperformance of Bitcoin just because if you look back, you know, six, 12 months, what is so great?
Yeah. No, it is true. I mean, that's one of the things that Tom Lee's trying to stress relative outperformance since the Iran conflict broke out for why he continues to throw money into ETH. But I do want to get your take just kind of in terms of there was one other element that I see as one hanging over things in '26. We talked politics a lot last time you came on. I think I was just asked about this as well. The odds for Dems to sweep in Congress are now 50/50 which is kind of crazy to think about where they were last year. Is that kind of an overhang too if you think about how much Bitcoin rallied? If that does happen, how much is not priced in?
I could take the stance that I know a lot of people who are Western investors harp on about this like institutional investor and oh, we need to do this and that because we need BlackRock and Goldman and pick your banker, money manager to start doing stuff in crypto. Sure. And I say to them, I don't want them in here. I don't care. I don't care if no institutional investor buys everybody's Bitcoin or a cryptocurrency. The reason why this industry is valued at however many trillion it's valued at is it's precisely because we've given a cohort of the human population the ability to have a financial system unconnected from the government and big banks. The second that we started trying to create a system that's inclusive for these people who already have a system that's perfectly fine for them, what's the point of what we're doing? It's not attractive. And so, I think that who cares about, you know, I mean, it's a very US kind of concern like clarity, genius, whatever they name these bills. Doesn't matter. I don't care if any one of them gets passed. Actually, I hope Trump vetoes every single one of them if they actually do make it past US Congress.
I don't think anything's going to veto that one. Secretary Blinken just wrote an op-ed about wanting to get it. So, I don't think they're going to veto that one, but sure.
You know, we didn't need government support from 0 to 126,000, we don't need it from 126,000 to a million. The only thing that's going to make Bitcoin go up or down is do we build a financial system that's inclusive for all the people in the world who didn't have anything before and is a recipient of all the printed money that's to come or not? And so, again, I don't care about obviously whether or not the Dems win or not. Maybe that means government gridlock and nothing gets done. That's even better for crypto in my opinion. At least if you're a US focused person. And obviously that's got to weigh on Trump in terms of how he's going to, you know, who he's going to bomb, how long he's going to bomb them for because obviously this war was very unpopular with a lot of people and the odds of Democrats taking the Senate are now greater than 50%, right? I think that's risen pretty markedly since this campaign in Iran started.
Yeah. It has and I think, you know, I'm more in line with your take on follow the numbers, follow the money in terms of what politicians might have to do. I think Trump is a perfect example of that because every time S&P 500 drops 1%, he backtracks. We've seen the taco trade. So, this is not new, but certainly I think, you know, taking a longer term stance is important and interesting here. But I do want to shift to Hype. Maybe that's, you know, kind of in line with the thinking of if you're building a system completely outside of the actual system, then it doesn't matter and I think Hype is probably a pretty good parallel to that since a lot of traders are shifting over there. I think we have the chart our friend Sean Farrell at Fundstrat's been tracking kind of the volumes. You wrote your essay last, I think it was last year or maybe it was in March of this year. $150 price target you got on Hype. And are you more confident like seeing this play out? That's a pretty big jump in terms of volumes on there. So, obviously how do you feel here?
