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Summary of key points
In this podcast, Nic Puckrin once again invited Arthur Hayes, a senior expert in the cryptocurrency field, to explore the current market trends and future investment opportunities.As co-founder and former CEO of BitMEX, Arthur has profound and unique insights into the crypto market.On the show, he analyzed the impact of the yen’s fluctuations on the market and the role of the U.S. Treasury Department in a political environment.
In the show, Arthur discussed in detail the impact of the lifting of the yen arbitrage transaction on cryptocurrencies and predicted the price trends of Bitcoin and Ethereum.He also discussed how the upcoming U.S. elections may affect financial markets, highlighting the importance of political factors in economic decision-making.Additionally, Arthur shared his views on Aptos and Solana, analyzing the potential of both in the Web 3.0 space.
At the end of the show, Arthur proposed a forecast for the future market and explored the development prospects of Bitcoin L2 (the second layer solution).He called on investors in the crypto industry to be more politically active to ensure their interests are reflected in policy making.
What’s happening now
Nic Puckrin raised the current market chaos, especially the yen fluctuations, the lifting of arbitrage trading and market concerns about recession.He reminded the audience that they should consult a financial advisor when discussing investment.
Arthur emphasized 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.
Japan’s economic and monetary policy
Arthur explains the impact of the U.S. Treasury’s quarterly refinancing announcement on market liquidity.He pointed out that due to tax revenue, the Ministry of Finance reduced the issuance of short-term Treasury bonds in the second quarter, resulting in a decline in market liquidity, which in turn affected the performance of cryptocurrencies.He believes that as the Ministry of Finance reissues treasury bonds in the second half of the year, market liquidity will gradually improve.
Release of yen arbitrage transactions
Arthur analyzed the operating mechanism of the yen arbitrage transaction in detail, pointing out that the Bank of Japan (BOJ) supports this huge arbitrage transaction by creating the yen.The transaction size reached US$25 trillion, becoming one of the most important transactions in the world.With the depreciation of the yen and inflation, the Japanese people began to intensify their dissatisfaction with the government, and BOJ was forced to take measures to gradually normalize monetary policy.
Future Outlook
Arthur believes that the lifting of the yen arbitrage transaction is a structural process and is expected to continue.He is cautious about BOJ’s future policies, believing that they will not easily return to negative interest rates.He also mentioned that US Treasury Secretary Yellen and Federal Reserve Chairman Powell may use money printing to help BOJ transition smoothly and alleviate the market impact.
The politics of the Ministry of Finance
While discussing the Treasury role, Nic mentions Treasury Secretary Yellen’s influence and her role in the upcoming U.S. elections.
Arthur said the Treasury has always been a political entity, but the current political climate makes its market operations ahead of key election dates even more obvious.He firmly believes that Yellen will do everything possible to support Vice President Harris’ re-election opportunity.
Monetary Policy and Elections
Arthur believes that the Treasury Department and the Fed may use the approved liquidity exchange procedures to provide US dollars to the Bank of Japan (BOJ) to help maintain market stability.He described a possible way of operation where the Treasury would buy back U.S. Treasury bonds and stocks at prices that did not affect the market and then provide the dollar to banks and businesses, encouraging them not to sell the assets on the market.
Future Outlook
Arthur pointed out that this operation can allow the yen to gradually appreciate without really lifting the arbitrage transaction, while continuing to push the U.S. market upwards, thus creating favorable conditions for the Democrats to win the election.He believes that this strategy may keep the market stable and bring benefits to politics.
Arbitrage transactions between cryptocurrencies and yen
Arthur confirms that there are indeed some funds and cryptocurrency investors who invest in cryptocurrencies by borrowing yen, which is a common practice.He noted that many traditional hedge funds seek the lowest cost of funds, and if risk management allows them, they borrow yen and use that funds to buy crypto assets such as Bitcoin.
Cryptocurrency as an investment asset
Arthur mentioned that with the inflow of yen borrowing, liquidity in funds in the cryptocurrency ecosystem has increased.He also noted that the price of Bitcoin in the yen had risen a few days ago, suggesting that this trading strategy is effective.If the Bank of Japan continues to maintain zero interest rates, borrowing yen and investing in Bitcoin would be a very attractive deal.
Market liquidity and risk management
Arthur further explained that when large-scale de-risk development occurs throughout the financial ecosystem, investors tend to sell more liquid assets, such as cryptocurrencies, rather than those with less liquid assets (such as commercial real estate).He stressed that the liquidity of cryptocurrencies makes it the first choice for investors when market turmoil.
Ethereum’s liquidity issues
Nic mentioned the recent redemption of Ethereum and asked if this was related to the lifting of the yen arbitrage transaction.
Arthur believes this may indeed be related to the fact that some big traders are exiting the market, especially in the current market environment, where many investors may choose to reduce their exposure, leading to changes in liquidity.
Altcoins, Bitcoin and Elections
Seasonality of the crypto market and Bitcoin performance
Speaking about the “bull market” in the crypto market, Nic raised questions about whether Bitcoin will return to its all-time high by the end of the year.
Arthur believes that it all depends on the situation of the market.He said that if U.S. stocks fall by more than 20%, it will attract high attention from the authorities, especially Treasury Secretary Yellen, as it could affect the upcoming elections.
The impact of the stock market on voters
Arthur notes that wealthy baby boomers play a major role in the election.If their stock investments are significantly lost, it may affect their voting behavior.He stressed that if a financial crisis occurs during the election, voters may feel dissatisfied with the current administration and even choose not to vote, which is a potential risk for the Democrats.
Government revenue and capital gains tax
Arthur also mentioned that the U.S. government relies heavily on capital gains tax to support its fiscal revenue, especially in states like California, where the performance of tech stocks directly affects the state’s fiscal situation.Therefore, if the stock market falls lead to a decrease in capital gains tax revenue, the government’s fiscal deficit will expand, which will force authorities to take action to stabilize the market.
Future market reactions
Arthur predicts that if the S&P and Nasdaq fall 20% by Friday and the market volatility over the weekend, there may be some measures taken over the weekend.If the market crisis gradually subsides in the short term and the situation does not change much, it may take one to two months until the market recovers confidence in the fall.As elections approach, the government may take more aggressive measures to ensure wealthy voters are satisfied with the market, thus affecting the election results.
The relationship between cryptocurrency and politics
Nic mentioned that cryptocurrencies are becoming increasingly important in the political environment of the United States and have even become a key factor in voters’ voting.He quoted an article by Arthur that referenced a scene he saw at a party in Ibiza, in which he compared how politicians fought for crypto votes to girls who attracted attention at the party.
Political candidates interact with the crypto industry
Arthur believes that if the market has too high expectations for a candidate’s victory, this could pose risks.He mentioned that Trump’s performance in the debate was excellent, giving him an increased chance of winning voters.But Trump’s chances of winning may drop as Biden is replaced by Harris, which may affect confidence in the crypto market.
The strategy of the crypto industry
Arthur notes that while both Democrats and Republicans are elected, ultimately taking steps to support their voters, the crypto industry should be more aggressive 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 election day to gain their support, rather than wanting them to make a difference after they are elected.
Views on the future
Arthur stressed that voters in the crypto industry need to express their needs clearly and use this in elections to influence candidate policies.In this way, the crypto industry can gain a greater voice in politics and ensure that their interests are reflected in policy making.
Cryptocurrencies that should be bullish and their narratives
Arthur mentioned his recent launch of the “Airheads” project and was very optimistic about Ordinals.He believes that as the Bitcoin market recovers, Bitcoin holders will become richer and will seek digital assets that reflect cultural value.He emphasized that ordinal numbers, as a native digital artifact of Bitcoin, are essentially different from traditional NFTs, which makes it uniquely attractive in the market.
Current market opportunities
Arthur notes that the current market sentiment is a great time to build a unique art collection.He encourages investors to find original works of art that resonate with themselves and uses this opportunity to demonstrate the potential of ordinal technology.
Pay attention to exchange tokens
When it comes to tradable alternatives, Arthur mentioned undervalued protocols that provide real benefits for traders.He did not list the items specifically, but emphasized the importance of finding a protocol that can provide stable or other cryptocurrency returns.He mentioned that the valuations of many projects do not reflect their actual value, especially in the case of general market selling.
The potential of Aptos
Arthur also mentioned his role as an Aptos consultant and expressed optimism about the project’s collaboration with traditional financial institutions.He believes that Aptos’ application in the Web 3.0 field will drive its growth and predicts that Aptos will achieve important market position changes in the next two to three years.
Future Outlook
Arthur said he and his team are writing a comprehensive model detailing the potential of Aptos and the details of their collaboration with large financial institutions.He will share more information at the South Korean conference in September and look forward to revealing more at the event between South Korea and Singapore.
Aptos and Solana
In discussing Aptos and Solana, Arthur stressed that while both use the Move programming language, he believes that technology itself is not a key factor.He pointed out that what ultimately determines whether the cryptocurrency is successful or not is the actual usage and needs of the user, rather than technical indicators (such as the number of transactions per second).He believes that when financial institutions turn to Web 3.0, they focus on how to do practical operations on public blockchains, rather than technical details.
Aptos’ market positioning
Arthur mentioned that the Aptos team actively cooperates with traditional financial institutions to provide solutions so that these institutions can move smoothly to on-chain operations.He believes that this collaboration will drive Aptos’ transaction volume and network fees to grow.He stressed that while technology may affect the decision-making process, for the average trader, the focus should be on partnerships with these financial institutions and how they use the platform.
Competition with Ethereum
When talking about Aptos’ competition with Ethereum, Arthur pointed out that although Ethereum dominates the market in the issuance of RWA (real-world assets), when financial institutions choose blockchain, they mainly look at the functions they need.For example, how KYC (Know Your Customer) operates on the chain may affect organizational choices.If Aptos provides a better user experience in some ways, institutions may be more inclined to choose Aptos.
Encryption areas that should be avoided
When talking about crypto investments that should be avoided, Arthur first highlights the risks of leveraged trading.He pointed out that leverage should not be used unless investors can focus on the market throughout the whole process and manage their positions at any time.Many investors can suffer significant losses when markets fluctuate, especially if positions are not monitored in a timely manner.He reminded that short-term volatility in the market does not necessarily mean that a project’s long-term value declines.
How to think about investment decisions
Arthur mentioned that when facing losses, investors should consider whether to transfer their funds to more potential projects rather than simply waiting for a return.He believes holding poorly performed assets could lead to loss of opportunity costs.For example, if an investor loses on a project, but at the same time there are other projects that may rise sharply in the coming months, it may be a smarter choice to adjust the portfolio in time.
Pay attention to the issuance time and market performance of tokens
Arthur notes that investors should pay attention to the token’s issuance time and market performance, not just the industry or narrative they belong to.He said many tokens are issued at high market capitalization, but lack user base and growth potential, which will put them in challenges as the market recovers.He advises investors to focus on new projects that have performed poorly in past market cycles but may perform better in the current market environment.
Avoid overestimating projects
Arthur specifically mentioned that projects that reach high valuations in the 2021 cycle may face greater risks if they lack corresponding users and growth indicators at present.Investors in these projects should consider step-by-step exits and investing their funds into better-performing emerging projects.
Bitcoin price forecast
When discussing the future of Bitcoin, Arthur gave a rough target price, which is expected to reach $100,000.He mentioned that prices may fluctuate within each $5,000 range, and stressed that changes in markets may be affected by a variety of factors, including changes in the economic situation and policy.
Political and economic impact
Arthur mentioned that the current U.S. political situation could affect the market, especially in the upcoming elections.He believes Vice President Harris is a slightly popular candidate, but Trump’s chances will increase if a financial crisis occurs before the election.He stressed that market performance (such as the S&P 500) and economic indicators (such as oil prices) will be important references for judging election results.
Support the Bitcoin ecosystem
Arthur talked about his support for Bitcoin and explained why he was involved in the “Maelstrom” open source funding program.He said Bitcoin’s success is directly related to his wealth, so he hopes to strengthen 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 Pioneer Group from controlling the dominance of Bitcoin.
How to participate in a funding program
Arthur provides information on how to participate in the Maelstrom funding program.He mentioned that interested people can apply for funding through the official website, and all proposals will be evaluated by Jonathan Beer and the grantees will be notified around September.He encourages everyone to actively participate in order to promote the further development of Bitcoin.
The potential of Bitcoin L2
When talking about the sustainability of Bitcoin, Arthur expressed optimism about the development of Bitcoin L2 (the second layer solution).He believes that L2 technology will bring more value to Bitcoin, especially when miner rewards are gradually decreasing and transaction fees need to be balanced.
Arthur mentioned that he is working as an advisor to an L2 project called Mezzo and believes that these technologies will be able to implement smart contracts and decentralized finance (DeFi) on Bitcoin.
Security and availability
Arthur stressed that while some core developers are cautious about L2 solutions, he believes that security is a priority for the network.He noted that while some criticize Ordinals as spam and spam on the blockchain, these “scrap” actually pay for transactions, thus supporting the operation of the network.He believes that similar ways should be created to allow DeFi applications to exist on-chain and pay for their use.
Avoid becoming Ethereum
Arthur warns that Bitcoin should not be trapped in the situation of Ethereum.He mentioned that Ethereum made a hard fork to save the project while handling the 2016 DAO hacker incident, sacrificing its attributes as a currency.He believes that Ethereum is positioned as decentralized computing, not currency, so the contradiction between the two places its development challenges.
