Why Arthur Hayes Says Fed Chair Kevin Warsh Is a Dove Despite Hawkish Reputation

Let's call it 0 to 2 years, 2 or 3 years from now, I think the AI bubble will burst. Who knows when? Number one, I would never short anything AI, even if I believe that some of these things are completely fugazi, but that's just a recipe for disaster. But, at the end of the day, if the music's playing, you got to dance.

Thanks for having me.

So, obviously, people have been very afraid of what happens when MicroStrategy has to sell Bitcoin to cover dividend payments or any sort of bond repayments. And so, obviously, Saylor did this 32 Bitcoin test, as he claimed to inoculate the market on strategy selling Bitcoin. That's only prompted more questions. There's been other salacious hot takes of Saylor talking about some Jedi mind tricks about him not really saying that he never would sell Bitcoin and all those sorts of things. So, I think people are very scared of what could happen on the downtrend. And obviously, overnight there was a story. I haven't really read too much into it, but obviously, the markets traded down. I've heard some other people that I follow talking about this. And I think this is part of the broader trend where AI is doing really, really well, and all available risk capital is going to AI trades and not going into crypto. And if you have MicroStrategy or fears that MicroStrategy might have to sell some Bitcoin for whatever reason, that could add as an additional negative catalyst for the markets. And so, I don't think that MicroStrategy is causing Bitcoin to fall. This is literally just liquidity going to everything AI and nothing else. But, this is just another pain point for investors.

I don't know. I'd say let's call it zero to two years, two or three years from now. I think the AI bubble will burst. Who knows when? Number one, I would never short anything AI even if I believe that some of these things are completely fugazi, but that's just a recipe for disaster. But, at the end of the day, if the music's playing, you got to dance. And if you have a depreciating piece of fiat, and all the activity is happening in the AI space, that's where you have to play because most people feel like they're on this treadmill, they're going backwards, and they need to use leverage or trade the highest volatility instrument to sort of escape the debasement that they're facing at the hands of governments around the world.

So, previous to that, I listen and read a lot of different analysts and they fall into the situation that the Fed, the Treasury, and the US government and finances mean that the Fed will have to be dovish regardless of who was at the helm. And then there are those who say Warsh is going to bring back independence, sound money, all these things, prestige back to the Federal Reserve. And so, I didn't know which way to lean on that. But, it was a very big tell in this press conference in that if you take a look at Warsh's comments since he left the Board of Governors, I think in around 2010 or 2011, and he left as a protest of quantitative easing. And he's got many statements and op-eds and essays about the ways in which the Fed needs to change the way it operates. And then he gets in the head honcho's seat, and he asked for a task force. He doesn't need a task force. He should just state exactly what he thinks that has to happen. Now, that doesn't necessarily mean that he has the votes to get it done, but at least put Jay Powell and anyone who believes in him and his reign on notice. Put them in the hot seat. If you care about price stability, why aren't you reducing the balance sheet? Why haven't you raised rates aggressively? Why haven't you done away with forward guidance and the dot plot and all these other things that he's criticized the Fed for doing, but yet he comes in and does a task force. So, what does a task force mean? In 6 to 12 months we might get a report. And then the committee will consider the report. And by the time they consider the report, then we'll have forgotten about it. And they can continue printing money, doing the reverse management program. They're holding rates even though you have the seventh richest company in the world was launched or fifth richest, what, 2 days ago, with 100 times sales, mining, doing data centers in space. So, I think that all things point to money is too easy, yet rates are on hold and there's a task force to determine how to revamp the Fed. So, I think Warsh is a dove. I think he wants to maintain this illusion that he is hawkish on monetary policy, but look at what he does. Task force. He has all the tools. He knows exactly what needs to happen. He should have put everybody on notice of this is what I am going to do during my reign and if I don't have the votes now, I'll get them in the future.

Correct. Money printer go brr.

I didn't read the report. At the end of the day, Uniswap goes up when actual protocol revenue or profit flows to the token holders. I know they've been talking about a fee switch. I don't think it's actually happened yet. So, when the money starts flowing into token holders, then the token goes up. That's it. That's all that matters. So, if that's happening, great. If it's not, then fade this.

So, number one, I run a trading shop and what we do, we take positions, we publish our point of view, and people agree or they disagree with us. We do that on the way in, we do it on the way out. So, I don't think there's any sort of malfeasance going on or dumping on followers, anything like that. People agreed with my point of view at least in some respects and the thing sold off, but it rallied back. I don't know where the price is now. I think it's a little bit lower. But again, do your own research. I'm a trader, I'm pointing out a point of view. You can either disagree with it or agree with it. And sometimes the market disagrees and most of the time I'm wrong, by the way. So, if you take a look at my calls, I think I'm probably 75 or 80% of the time I'm wrong. So, I don't think there's any water to the notion that I'm dumping on followers or have some sort of manipulative effect on markets.

I mean, the question for Sol is what is the next meme coin transaction craze? As meme coins died, the sort of Solana excitement died with it. So, what is the next thing that's going to generate on-chain activity for Solana? I don't know what that is. I would love to hear some opinions from the Sol bulls of what particular type of activity is going to generate activity on-chain, which will lead to price performance. Other than that, the exchange business is the best business that crypto has ever known. HyperLiquid is a number one decentralized exchange. I think it still outperforms Solana.

I've been hearing the institutions are launching experiments since 2013. And guess what? It doesn't matter. They never really come to anything. If anything, an institution might launch a private blockchain using some of this technology. I have yet to see an institution at scale replace their entire back office with a public blockchain. I hope that happens, and we'll see what kind of transaction volume it generates when it does, but this institutions are coming rallying cry falls a bit on deaf ears given that it's never worked in the past.

Thanks for having me.