# AI Job Losses, War, and Crypto Liquidity

**Podcast:** The Milk Road Show
**Published:** 2026-03-03

## Transcript

My point is that 10 to 20% of job losses in knowledge work is game over for the banking system because of how much leverage is an employee, right?
I don't need everyone to lose their job, just a little bit.
And then the market goes, oh shit, everyone's gonna lose their job, even if that's not the case, right?
What's up, everybody?
It's LG Due Set here, and welcome to the Milk Road Show, the daily crypto show that's the only place on the internet where we look at a looming global conflict and think, man, the Fed is gonna have to really print for this one.
Today is March 3rd, 2026, and we are joined by the one and only Arthur Hayes to break down a high stakes theory why war in the Middle East might actually be the catalyst for the next massive crypto rally.
Yes, I'm serious.
We dive into the historical war playbook of the Fed, the looming solvency crisis caused by AI-driven job losses of the future, and why Arthur is actually gonna bet big on decentralized exchanges over traditional giants.
Whether you're worried about that 10 year bond or looking for maybe like a two, three, five X narrative, this is an episode you cannot afford to miss.
Today's episode is brought to you by Midnight, bringing rational privacy to blockchain, warbucks the easiest way to trade crypto, and nexo, earn interest, borrow, and trade crypto.
Arthur, you're back.
Uh welcome back, man.
Happy new year.
I haven't seen you since uh since last year.
Yeah, it's great.
I've been ahead of great ski season.
Uh I'm still alive, thankfully.
Uh so yeah, it's time to do some podcasts.
Uh you you didn't miss much until the last couple weeks, man.
Honestly, like I I wish I just went skiing every day for the last three months.
I don't think uh I don't think anything would have changed for my positions.
But uh let's dive into it.
You wrote a great piece yesterday, uh just came out the other day, basically about you know all the events the last couple days of the the this long-awaited conflict in Iran uh and and what it means for the Fed.
So so please tell us a little bit more about that.
So, yeah, I was you know noodling on like what do you do in this situation where obviously, like as a crypto bro, I don't know shit about shit in terms of military or geopolitics or who's telling the truth on XYZ media platform.
I don't know shit, right?
But what is there something objective that I can frame myself to look at to understand what I should be or not doing with my portfolio?
That's okay.
Let me go on the my favorite AI tool, perpetuate computer.
And the first prompt was okay.
No, I know, at least in my lifetime, I've been around since 1985.
The US has been at constant war with some Middle Eastern country ever since uh I came out of the womb.
So let's let's just chart that see what did the Fed do.
And so the you know, I put a chart in my essay uh and I delineated between military strikes, you know, a bunch of missiles fired, or like an all-out war.
Again, it's not an exhaustive list, it's illustrative of the theme.
And there's three main episodes in terms of a big war, and now I guess we could call this from the fourth that stand out and mention Gulf War in 1990, and coming out of uh the recession from the savings and loan crisis, the you know, George H.
W.
Bush, president at the time, decided that he wanted to go to war with uh Saddam Hussein, and essentially oil price spiked.
A few months into the conflict.
The Fed started cutting rates, citing the uncertainty in the Middle East as one of the proximate causes for why they were increasing liquidity in the financial markets.
We fast forward to the uh September 11th attacks in the US and the subsequent wars in Iraq and Afghanistan launched by his son, uh W.
Bush.
And again, immediately after September 11th, and then uh continuing on, uh Alan Greenspan uh lowered rates and was buying securities to essentially boost confidence, make sure that the financial markets had enough liquidity to continue to rally.
And then, you know, the third sort of major war effort was Obama's surge, adding troops into the Afghanistan war, uh, his drone warfare in Yemen and Syria.
And essentially the Fed was already at zero in printing money at that point, so there wasn't really much more that they could do to support his efforts.
And you know, the other chart in there, and this is a very sad chart, at least for you know, American soldiers.
The if you take a look at the percentage of the federal budget spent on uh veteran affairs, essentially someone who comes back injured and needs medical care after serving, that has gone up twice as fast as the growth in the federal budget.
And so the more wars of choice that the US fights, the more people injured, uh maimed and killed, the more they're spending on this, and so the more you need to finance this.
I didn't even put the defense budget in there because I wanted to put a more human element as to the cost of this continuous intervention in in the Middle East.
And so now we get to Trump.
Uh, he struck around last year for the 12-day war, and now we look like we're gonna have a much longer one at this stage, at least going by the Reddick rhetoric and the change in tone from Trump and uh Heg Seth, the Department of War chief.
And so the longer this goes, and I know I think the next Fed meeting is in the middle of March, the more likely it is that a Fed is going to have to respond with printed money because you know, people start selling equities, oil prices uh spike.
You know, if Trump decides he wants to send ground troops into Iran for whatever reason, whatever objective he claims he's he's going to um give those troops, that's going to require a lot of money and a lot of borrowing.
And so the Fed will have to finance the government.
That is their job.
And there is bipartisan support.
If you look at this chart, there's been Republican presidents and Democratic presidents, every single one of them is in the same thing that attacked the Middle East.
And so the Fed will not have this issue of, oh, you know, I hate Trump, therefore, I'm not going to print the money that he needs.
You know, they are part and parcel of the American Empire, and therefore they will do what's necessary, print the money so that the government could spend it to, you know, finance this war.
And so that's sort of my continuum.
So like I don't know what's going to happen.
All I say, okay, the longer this goes on, the more likely it is that the Fed prints.
If we get to middle of March, and you know, maybe there's American soldiers in Iran or Iran is continuing to um take out energy infrastructure around the region.
Confidence in this highly leveraged Western financial system collapses because they're like, oh, if I can't even count on the United States to be have the ability to completely obliterate Iran's ability to disrupt you know crucial trade and energy flows, do I really want to own these assets?
Maybe I should be, you know, holding cash, goal, or something else.
So the only way you're gonna get the market to come back to its census per se is to print some money.
And so that would that's how I'm viewing this.
Am I buying anything right now?
No, I'm in my position, I'm happy it is what it is.
I'm waiting for that press conference from Jerome Powell saying, you know, due to events, unforeseen events in the Middle East, we are providing a combinative monetary policy and whatever euphemistic term they want to use for why they're financing the war effort on behalf of Trump.
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So do you so are you basically anticipating that between now and the FOMC, which is the 17th and 8th and 18th, so two weeks away, that there would be escalation, which is an obvious question, but that that escalation would then drive this uh Fed cut or monetary policy, like that that that's what we'll see, or would it be based on like events right now?
Because even I'm saying that within context that everybody expected the market, which is absolutely nuke today and didn't really, right?
And even crypto is the same.
I think the market still believes that the US has an overwhelming superiority militarily.
It's not that's not a question, right?
And so people think, okay, well, we might not like what Trump has done.
Yeah, but he should be able to take them out within a few days.
I mean, if it started as four days, now it's four weeks, then it's five weeks, I don't know what the timeline is.
But I think the market assumes that um Trump is going to be able to take out the Iranian leadership, they'll be able to install some sort of puppet regime, and then they're gonna stop bombing stuff in in the Middle East.
Right.
That obviously is the assumption right now and oil is what is like $75, whatever it is, right?
So I think we're still in that honeymoon period of the markets.
If this is next week and refineries around the Persian Gulf are getting bombed, ships insurance to travel and the Strait of Removes, maybe in the Red Sea, has skyrocketed to premiums where people say, you know, fucking, I don't even want to be there.
If the airports are still closed in Dubai and Abu Dhabi and Qatar, and all these sort of Middle Eastern financial hubs, then I think that the realization that this could be a long drawn-out conflict with an unclear objective, similar to Iraq and Afghanistan, then people are going, okay, well, I know that they're number one, they got to borrow a lot of money because Iraq and Afghanistan over two decades costs almost 10 trillion dollars, right?
So why do I want to own this 10 year bond?
So yeah, at 380 or whatever it is in the 10 year, maybe I shouldn't be owning these bonds because they're gonna have to issue a lot of debt.
And do I really want to own all of these leveraged assets to energy prices effectively if this 20% of the world's uh energy has been disrupted and there's no end in sight of when that's going to change?
And even if it stopped today, well, how do you rebuild this stuff immediately?
It takes time to be rebuild rebuild these things.
Do the energy companies want to reinvest in a region where they just saw that a bunch of like $10,000 drones took out their multi-billion dollar facility?
Do I really want to go and underwrite that again?
Or am I gonna have to get a handout from the government to do it again?
Am I gonna tell it Trump, okay, you want me to build a refinery?
Absolutely.
Give me the money to do it, right?
And so I think these are the questions that we're gonna have to start asking.
We're not asking those questions right now because everyone's like, okay, US, they've got F 5 15, they've got Tomahawk missiles, Iran are just a bunch of you know, cave dwellers, they're gonna kick their ass.
Therefore, this is gonna be be over soon.
And if that's not the case, then I think we're gonna have a massive repricing of risk in the Western financial markets.
There's probably a short-term bias as well, right?
Because even the Venezuela situation was like, well, they brought Maduro to New York, and then I don't know, nobody even talks about it, and they're not really, there's no troops.
There's not, there's not hundreds of thousands of troops there.
And even I think Iran might be even a little overdone too, because people forget.
I think even in June, the US and Israel were doing a joint strike on the nuclear facilities in Iran.
So I feel like people don't really understand the significance of how bad this could get.
And if it does get to that, what you're telling me is that then we're gonna see a major reaction from the Fed if it were to continue to escalate or can can it carry on into that meeting in two weeks.
Yeah, I mean, and it doesn't even have to escalate, just is the US still fighting Iran.
They're still doing two weeks.
And then we'll we'll see.
Yeah.
What is that?
What does that mean then, Arthur, for um uh for crypto?
Because I think crypto in the the previous uh examples that you cited, like maybe the Obama years, but even then uh crypto was kind of in its own uh uh somewhat inf infancy compared to now.
And then in the the bush, the two the double bush years, there was no crypto.
So how does how do you foresee crypto reacting uh in in either scenario?
So either crypto looks forward and says the longer this war goes on, the more money is printed and rallies, even if equities fall, or crypto gets spanked, like equities, US equities particular, as people degross their entire portfolio.
It's like, okay, war is bad.
I don't know what's gonna happen.
Obviously, this is going on longer than they told me it was.
So let me just sell everything and sit in cash, right?
And everything means SAP, NASDAQ, Bitcoin, right?
You sell it all.
Uh, and then it goes down with equities until we get the oh, we're gonna print the money, and then it goes right back up, right?
So I think either one of those scenarios, I I don't know which one is more likely than the other.
So I wouldn't if it was my money and you know, I am doing this with my money, I'm not buying anything.
I'm just sitting there looking at the charts and and waiting for a signal.
Got it.
Okay, okay.
Okay, that makes sense.
Do you how do you see um and I gotta kind of tie this into your your previous piece from a few weeks ago uh titled This Is Fine, that where you're basically telling telling us that Bitcoin tends to front runt narratives and sniff out liquidity quid to liquidity problems before equity is due.
Um there's a large narrative inequities right now that you know you saw Block last week firing uh 40% of the staff.
Is that um, I mean, I don't know how this is related to the war, but obviously it's a confluence of a lot of uh potential volatility all at once in terms of the narrative space.
Um how how do you see that factoring into to everything that's happening?
Well, I think I mean Bitcoin at six, seventy thousand or whatever is right now, yeah, is definitely factoring in this potential massive, well, I don't think it's potential, this massive deflationary event as you know, a certain percentage of the knowledge workforce, at least in America, uh no longer have a job and they no longer can be able to service their high debt loads and they won't be able to consume with the same propensity that they did before all these AI tools.
I don't think the market is recognizing that yet.
We're still in the of course, not a hundred people like, oh no, AI is gonna lead to retraining.
Okay, well, how many people were retrained after they lost their you know job with full lifetime benefits because China was more efficient?
How did they retrain?
Did they get the same kind of job when they got back in the workforce?
Um, I don't think so.
I think that they're sure they got a job, was definitely wasn't as uh the Bennies weren't as good.
They weren't making as much money.
I mean, these are the people who voted for for Trump in 2016 and 2000 uh and 24.
So three times, right?
Like this is the cohort that Trump went after.
Um, and so obviously that this retraining narrative, yes, you retrain for something, but did you retrain to make the same 250,000 a year salary, or did you retrain and become an Uber driver making 50?
Right.
So again, I don't know what retraining means.
I think we're all, I think a lot of the financial analysts are still stuck in this.
Oh, there's um creative disruption, America's capitalist model will find a thing, find something for these folks to do, and then they'll rejoin the workforce and continue to spend money like they were.
And so that's the narrative right now.
And so that until that narrative breaks, we're not really gonna see the contagion effect in what I think of the regional banks.
The smaller banking outfits that don't have a government guarantee, that have a lot of these consumer loans as a higher percentage of their balance sheet than say a JP Morgan or a citibank.
And the Fed's discount window is not set up to um accept assets that are essentially worth zero, right?
If somebody loses 10% of the workforce loses their job, they're not gonna be able to service these debts.
It's not a, oh no, it's uh a liquidity issue.
This is a solvency issue for the people who borrowed this money.
But we're not there yet.
And but I think it's gonna come faster than people think because if you look at the progress in terms of these ejectic AI models and what they can do, it's insanely exponential.
This isn't like China entering the WTO.
If you want to offshore a factory, it takes multiple years to do that before you, you know, get to the management approval, you know, are able to construct something new, you know, all the things you have to do.
But if $20 a month Claudot or however much it costs can replace, you know, a whole team of back office accounting, that's instant.
Especially in the United States where you have an at-well employment market and there's really very little labor protection for people.
Um, they're going to be more companies like Block who fire a large swath of their workforce and they're rewarded by the markets.
The stock pumped 20% when you announce that.
So the CEOs and management get richer if they fire all their workers and replace them from AA.
That's the message from management.
And we know management only cares about their compensation.
And so they're going to do more of this.
And then there'll be this moment where everyone recognizes, oh shit, you know, these reports, yes, they were directionally correct, but unemployment went from 4% to 8%.
Uh, and then they've some people start freaking out, and that's when you get the repricing of a lot of these these debt instruments down to an assumed value of zero, and how you get a banking crisis.
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You basically broke it down into three phases, which has been a huge part of the narrative in the last couple weeks, including your piece, and then we had this in Trini piece a couple weeks ago.
And a lot of these kind of, you know, uh doomsday scenarios.
I would say that that's that's basically like kind of a spiral that you're predicting where like the first phase, like you're saying job loss, bank stress, stock drop as a result of people selling uh as well, but also some stock volatility, right?
Um, Bitcoin would go down with everything else.
I think in phase two, um, the banks start to wobble, you have a credit freeze, you have emergency fed liquidity programs, and that, and that in phase three, once all that kind of craters, then you have an insane QE, basically, right?
Like similar to two, I think you compared it to 2008, that there would be like an insane QE on the on the next leg, like as a rebound.
Um, I think you describe in here that the Fed would basically let the markets fail before acting.
Tell me a little bit more about that.
Like, is that is there a precedent there?
Well, the Fed is a reactionary political institution, and we know that there is a large percentage of Fed governors that hate Trump's guts.
The last thing they're gonna do is start lowering the rates if there's not an actual crisis.
What crisis are we talking about?
If you listen to the rhetoric from the Fed governors, it's AI is a great productivity tool, it's going to elevate the productivity of the US worker.
There will be no unemployment due to AI.
This is what they're saying.
So how can they then go and say, oh, it's going to decimate the workforce, so let's print a bunch of money.
So until you get the actual market stress related to increase in AI related job losses, the Fed cannot act.
And so we need to have the signal from the market that something's wrong.
And the signal is not Bitcoin, right?
Because the Fed doesn't think Bitcoin's a real thing.
The signal is, you know, the regional bank index is down 45%.
Um, there's banks that are getting smoked, you know, 15, 20% every session in the United States.
That's the signal.
That's when they have to step in.
That's when they have the political cover to do whatever they uh they want, which is to print a lot of money because the politicians are gonna be crying for it.
All these people who were their big biggest political supporters, the backbone of sort of the intelligentsia in the United States no longer have a job anymore and are in the breadline, just like the guy from the hood.
And that's what is that gonna do to somebody's ego?
They're gonna be calling up the representatives, you know, fuck this AI thing.
What are you doing for this?
We need we need support, we need more unemployment insurance, we need this, we need that.
I supported you, dah da da, right?
These are the most politically active people who are now gonna be out on the street.
You don't think they're gonna call the representative and demand uh a government handout.
And they'll get it eventually.
And so I think, but again, the FedEx cannot act until we get the real market signal.
Right.
It has to happen.
So so, and just to come back to the start of kind of the piece here is that you're saying that Bitcoin is previewing this at this current time.
Yes.
And if you take a look at some Bitcoin, some of the software SaaS uh stocks, the diversions from the NASDAQ, Bitcoin is saying there's a liquidity issue.
There is this incipient banking crisis waiting to happen.
And you know, that's what it's selling us, I think.
And what what's what in your mind?
What's the probability of this kind of scenario?
Like, is this a foregone conclusion that it's going to play out this way, or are there are there other ways?
Is there a scenario where everything's overhyped?
The AI is overhyped.
This is the limit, nothing else progresses, and everybody keeps their jobs.
I mean, I think this is a very high probability because what I'm saying is not that AI takes everyone's job, which I think is a strong argument for people who say, oh, you're full of shit, Arthur.
AI is not going to take everybody's job.
I'm saying that's not my point.
My point is that 10 to 20% of job losses in knowledge work is game over for the banking system because of how much leverage is employed, right?
I don't need everyone to lose their job, just a little bit.
And then the market goes, oh shit, everyone's gonna lose their job, even if that's not the case, right?
So right now it's nobody's gonna lose their job, you're an idiot, to five percent and seven percent unemployment.
Everybody's gonna lose their job.
Let's sell everything, right?
So is it overreaction on on both ends?
It's the overreaction on the rise in unemployment um and the narratives around AI, which leads people to move their money out of the small banks into JP Morgan and to dump these stocks.
And that's where the Fed has to come in and act.
So um, I guess it's all of a question of like your framing and how you you know look at and forward price some of these outcomes.
Would if we saw like a Bitcoin rally in the coming months, like if we rallied back to like 100k, would that change your thesis or would you still hold there?
Uh, I mean, I'd still I'd say, okay, well, let me look at some other indicators to see if there's something else going on.
Like, yeah.
But let the price tell me, okay, well, obviously the price went from 124 to 60, so something's happening.
Okay, what else is happening um alongside that?
If Bitcoin rallies to 100,000, is there some credit that's coming in, or what's what's happening in taking it as a singular thing, I wouldn't say I'm right or wrong based on my my thesis.
I I can't believe I don't remember if we asked you this last time, Arthur, when you're on in December.
Um, do you think uh let's talk about Bitcoin just a price action wise for a second?
Do you feel like we we bottomed?
Because we hit we had we had another kind of crater day uh while you were skiing on February 5th.
Um that seemed like a pretty, a pretty uh catastrophic day in terms of of uh money leaving the market.
But I think that that's prompted a lot of people to say, be like, well, that was it.
We kissed 60k and that's it, and now now we're we've we've bottomed their market.
We have a lot of new theories that I'm sure maybe you've seen that.
It's like we've been in a year-long bear market, and that that was just it was it was propped up because of the dats and the and the institutional bid, and now we're actually feeling the real effects once that that bid has dried up a bit, although some of those that you know the dats are still buying.
Um, where where where do we go from here?
Usually you'll retest the bottom.
So if 60,000 was really the bottom, then I'm I want to see 60,000 tested again and uh the that level holds.
So I don't know if we're at a bottom.
I would say that you know, from my years of trading markets, you don't you do test the bottom release twice?
And so I don't think so.
I don't think we can call 60,000 the bottom.
It might, it might be the bottom, but I would want to wait for a confirmation uh test of that level.
Got it.
Okay, yeah, that makes sense.
Are you and you're pretty firm?
I I think people always want to know what your positions are.
And you made it clear, I think in your most recent pieces that you're Bitcoin, ETH, hype, and Zcash still.
Um what would would would anything shake you out of that?
Would anything shake you out of out of those positions if we were if it was if you get what if you got a clear signal that we're going to like 35k?
Would you would you get out and buy back?
Are you firm?
I mean, I'm structurally long all this stuff.
I don't like to short things.
Uh I've we raised a bit of cash at at higher levels.
So we have dry potter ready for if we fall to those levels.
And again, if we fall to 35k, I have to ask myself, what is what is true that wasn't true before?
Has a politician come out and said, we are going to enter a period of austerity, we've spent above our means, we are going to restrict credit, and businesses that shouldn't be around will you know not receive credit anymore, and therefore we're going to move to a healthier ecosystem and economy.
If I hear that and we're at 35k, okay, maybe I need to reevaluate uh my long position in a lot of these risk assets.
If I'm not hearing any of that, and this is just we're going to 35k because there's political sclerosis at a lot of central banks, and for whatever reason, they can't hit the money printer because of their domestic politics and how their voting systems work.
They're like, okay, cool.
The market has some volatility.
Thankfully, I don't use leverage, so I can handle this.
Yeah, my market is a massive, you know, negative number, but it doesn't really matter in the grand scheme of things.
I'm going to continue to hold.
I might you know be buying into uh some more assets just because the prices have gotten lower.
So it really is a function of like what is the monetary situation and the belief in terms of what the world economy should do going forward.
I'm gonna pause there for a second.
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What's it?
What are your thoughts on the um the agentic economy, right?
Because that's another big part of a lot of these, these kind of uh AI pieces that it's like, listen, like the the one bullish thing is crypto because that's what all the agents are gonna use.
You're clearly a proficient AI user yourself.
Is that true?
Or are all these millions of agents they're gonna be transacting in stable coins on ETH?
Is that what's the list like that?
I mean, it could happen.
And then the question is like just because there's a lot of transaction volume doesn't necessarily mean that that particular token goes up in price, right?
Right.
What are the tokenomics of that ecosystem?
How does the burn work?
What's the inflation level?
So yes, you could have a massive amount.
Well, do the agents create their own cryptocurrency between themselves that now we have to go and adopt as as the meat the meat, the meat market, the human market.
So I don't know what that situation is.
I do believe that um AI agents naturally should use some sort of blockchain-based cryptographic currency.
Whether it's one of the ones that we've already invented, I don't know.
That's definitely one of my predictions.
So why would that why would the agents are so smart in their AGI?
Why would they use the stuff we build?
Why wouldn't they just go make their own thing?
That's how that's how I feel.
Why would they want to have to use a human lawyer to advocate for them in this like fucked up legal system that we had to get their money back when they can just use code?
Yeah, and their own language, and we're just never part of it.
Uh I I like the idea that they're gonna do our bidding, that they won't just do their own thing.
I think that that's kind of a funny part, is that people are just like, yeah, that it'll be smarter than me, but it's gonna do what I say.
I'm like, I don't know, I don't know.
I don't know if that's that's that's not how any sci-fi works ever.
Um, Arthur, I wanted to come back to your um your theory on the on this, on this this AI kind of disruption.
What kind of what kind of timeline are you looking at?
It's really hard to pin that down, but you were saying that you think that that might happen to happen faster than people think.
Yeah, I mean, if you take a look at the release schedule and the um proficiency of some of these models, even over the last six months, it's like a factor level higher.
So I think that this could happen within the next three to six months in terms of a common knowledge recognition that there will be this massive wave of unemployment.
So right now we're starting to see the trickle effect of certain tech forward companies like Block saying, wow, I've received I've adopted some AI tools.
Again, they're not the best yet.
They're getting better and better, exponentially better over time.
And I already was able to write size my workforce by 40%.
Right?
And so I think that this more of this is coming.
And if a CEO looks at what Jack Dorsey did and saw the stock price go up 20%, what do you think they're gonna do?
They're gonna fucking HR, look at AI.
How many people can we fire?
I want my stock price to go up.
Yeah.
Right?
That's the that's the the response mechanism.
So this only accelerates the trend.
I fired 40% of my workforce, said the AI magic word in the press release, and my stock price went up 20%.
Like, no brainer.
It's like the opposite of what it used to be.
When they do earnings, they'll be like, well, we're gonna have to fire you know 20% of our workforce, and the market would be like, fuck that, and just dump the stock, right?
Because they're doing poorly.
Now it's the opposite.
Now they're like, we're getting rid of people, so you know, buy it, buy the stock.
It's gonna be profitable.
Um, sorry, I wanted to ask you a bit more about your your your your four holdings.
We talked about Bitcoin a little bit.
I think one of the biggest questions marks, honestly, man, it's funny, after all these years, it's still ETH.
People are still looking for like what is the actual bull case for ETH at this point.
That was why I was asking you the AI agent uh question as well.
Is it like, are they gonna use ETH?
And obviously, you're not saying, you know, you're saying that the the price to refer ETH may not appreciate.
Why hold ETH then?
Like, what are the reasons to be bullish on ETH at this point in time?
I mean, I haven't really thought too deeply on on it.
At the end of the day, it's still the largest and most secure decentralized computer, period, right?
Um yes, they need to figure out this sort of economics of L2s versus uh main net uh ETH and how that works and where all the value is is being created.
I haven't read of, you know, I know Vitalik has now been like posting a lot more about his roadmap for ETH and and and all that sort of stuff.
I mean, I'd say that like as a um percentage of my portfolio, ETH is steadily falling, and I've sold it to buy other stuff.
And you know, if Zcash performs like I think it will perform or hyperliquid, you know, we'll get the situation soon where ETH is like the number four largest asset in my portfolio.
And while it is this, you know, a large notional amount of money, it just doesn't really matter uh at that point.
I don't think it's going away, so I don't feel uncomfortable holding it because it is the most solid uh L1, and I don't really see any other L1s that have an ability, at least right now, to uh outperform.
I think Solana is obviously you know the next biggest contender, but then what are they gonna do after meme coins?
I think it's a question for Solana.
What's the next thing uh that they're going to be known for?
Unless meme coins come back.
I don't know.
So I think that's kind of how I I look at things.
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There's been some meme coins lately, but I don't know if we'll have another wave, like the FARC coins and all that stuff from like a couple years ago.
Um I think I think Solana is mainly like people are banking on RWAs, right?
Like I feel like that's been the big thing, but I think that that future is pretty ambiguous because a lot of people are putting their their head, their hats in the in the ring uh to be the the RWA leaders, especially from institutional standpoint.
Um and what's the case, Arthur, for for hyperliquid?
I'm a big hyperliquid fan as well.
Um, clearly something that's a major part of your portfolio.
Yeah, so when I and we'll be releasing this essay with my financial model, I think maybe next week, sometime.
So if obviously we'll fast go back in time.
I gave this speech in Tokyo in August of last year.
Like, like you know, 126x on hype, where it's fucking going on the moon.
I said in 2028.
So I didn't get myself a lot of time on this one.
You got time.
And then I know about a month and a half later, uh, I remember I went in, you know, I was looking at DeFi Lama.
I was like, oh shit, look at all these people putting up these good numbers in terms of uh ADV.
And it was just the start of the low to no fee competitors to hype, the um lighters and the asterisks and whatnot.
Yeah.
And obviously we have this big unlock coming up in November, an uncertainty about how much the team would actually sell.
And the price is trading at something like 50, 55.
And I was okay, boom, sell the position.
And then we wrote an essay about it, basically saying, hey, here's the issues with hype.
We have this massive unlock.
We don't know what's gonna happen.
We have these other competitors, will they actually take volume and trading fees away from hype because they're you know saying, oh, we're just gonna do it for free, right?
With the lighter and the asset, and they have at least rate liquidity farms to get in on these token prices.
So that was then.
The hype team since then, and starting in January, they'd had two months of uh token distributions, right?
So they have I think it's about it's almost 10 million hype tokens a month that they theoretically could distribute to themselves.
And November and December, they distributed about 20 to 25% of the allocated amount to themselves.
I imagine that's because, hey, they wanted to buy a Ferrari, pay some taxes.
You know, these guys have worked hard.
They deserve uh the fruits of their success.
And then, I think thankfully to the market, they made a decision.
Okay, it's better for us long term to increase the price of hype and then sell it than to basically just start smoking the price, like what happens with every other unlock uh of a lot of these tokens.
And so in January and February of this year, they've only allowed themselves to sell somewhere between one and two percent of the total allocated amount.
Now, once you've reduced the risk of a flood of supply to that level, the economics of hype kick back in, what we all were excited about.
97% of all rent of revenue is bought back and burned, essentially, uh, of hype token supply.
So while you're increasing the token supply of the 1% of the total amount of team allocation that can be distributed by their choice, obviously they could change this in the future.
You're deflating the supply by the fact that they're now at a run rate of close to back to a billion dollars a year of revenue.
That 97% of that is used to buy back the hype token.
And so we're back at a better situation and the price to earnings multiple on a market cap basis of uh circulating supply, not the FTV.
I don't look at that, I look at the circulating supply.
We're you know, somewhere around like 10, P of like 10, versus Coinbase CME Robinhood trade a P's of 25 to 35.
So they're supremely undervalued.
And then what I'm so excited about for Hyperliquid is that it actually is, you know, making good on this dream that a lot of us have had for a very long time.
How do we have permissionless listings on everything?
Bring price discovery to all the things that I want to trade oil after the US bombs Iran on Sunday morning.
Previously to hyperliquid, I couldn't do it.
Now there is a third party market on hyperliquid on the uh HIP3 where I can trade WTI oil futures, essentially.
It's a perk perk market, mimics that that future, and it was trading over the weekend.
Silver and gold were trading over the weekend.
SP 500 NASDAQ trading over the weekend.
Right.
So now we're getting a recognition by obviously ourselves in crypto, but even by mainstream financial media.
Bloomberg was talking about the only place to trade risk over the weekend was hyperliquid.
So this is the perfect moment for them.
And if you take a look at the percentage of revenue that's coming from HIP3 decentralized permissionless markets, it's been rising a lot.
And I think it's something around 10% of revenue is coming from these products.
And now they're highly leveraged.
And so this is, I think, the perfect moment for hyperliquid.
And the competitors have been shown to basically just be Fugazi volume.
Now, I can't prove any of this with 100% certainty, but we all know that for the exchange, you can either have organic volume, you can have liquidity mining for some sort of token, or you could be volumizing, creating wash wash trading.
We cannot ever know the exact ratio of those.
We can only take a statistic as our best guess as to who has the most organic volume.
And the statistic that I use is every daily trading volume divided by open interest.
Because if you have open interest, you have capital on the platform.
Capital is expensive.
You're not uh you're not wash trading the capital, right?
And so then if I have a very low ADV to OI, that means that most of my volume is organic.
Hype has the lowest ADB to OI ratio of any major um decentralized exchange, and is even lower than Binance, uh, the dominant sex per platform.
And so I know that hype has the realest volume out there.
I can't know that they're not doing any of these other things, but again, I'm using the statistic as a comparison mechanism.
So I'm not worried about LIDAR and Aster and all these other competitors because I know they have no ability to generate long-lasting organic volume past the point where they you know fake their volume versus wash trading and/or engage, have their customers engage in liquidity farming.
Again, I don't know what they're actually doing.
I can only use a statistic as a guide.
And so that's why I'm super confident that hyperliquid is number one, the largest fee generating protocol apart from an L1 in the entire crypto space.
It's trading at a 10 times PE, which is you know less than half or a third of what a listed company doing the same thing is doing in the United States.
And they're taking this revenue and giving it back to me as the token holder.
And finally, they've made the great decision that it's better to not issue as many tokens from our team supply so that the price goes higher and people have confidence that they're not just going to get dumped on by the team.
And so that's why I think that you know, hype at $30, I think we could be at $150 by the end of August this year.
Man, you had so much more to say about hype than ETH.
You had so much more to say, man.
Yeah, because I'm an exchange guy.
This is what I know.
This is my this is my shares.
So much more excited about the hype.
But no, that's a great explainer, man.
I think it's a that's the case.
I think a lot of people know that, but I think it's it helps to hear it again.
And it's it's a real product.
That's the thing, it's a real product, hopefully, that people use, right?
Can you apply that framework to other high high revenue generating products?
And obviously they're they're vastly different.
But if you look at that chart, Arthur, um, after you get past the tethers and the circles and then hyperliquid, you've got a pump, you've got sky, you've got aerodrome, right?
And those are an aerodrome exchange as well.
Is that is that kind of the framework you're applying?
Um but can investors use that uh to look for other other other tokens.
Absolutely.
And the biggest key is a lot of protocols make a lot of money, but then they don't give it back to us as the token holders.
So you really have to.
What is the mechanism between tweaking protocol fees and profit to me as a token holder?
Is it it's either two things.
Either they're gonna buy back the token and burn it and reduce the supply, or they're going to give me some sort of emission by staking the token.
That's it, right?
And so if you're not doing one of those and you make a lot of money, fuck yourself because you're not giving the money back to me as the token holder.
I don't give a fuck what your reason is why you're not doing it, because if you're not doing it, I'm not holding your token.
Period.
End of sentence.
And so I think that is the level that we've gotten to over you know almost 10 years in this DeFi situation since the ICOs of 2017.
We finally matured enough as investors to see that essentially our capital has been eviscerated and incinerated by a bunch of products that either had no clients to get paid no money, and that money, even if they made it, never made it back to us as the token holders.
We're done with that.
Everything is hyperliquid or a zero.
And so I think hopefully this is going to incentivize um founding teams at projects who are making money to sort of get off their ass and start giving us the money back as token holders.
Because if you don't, then your token can stay down in the doldrums while everybody fets hyperliquid.
Is there are there any projects in particular you want them to hear that message?
Um people who people need to hear that message know who they are.
I don't know if they're listening.
I'm curious.
I don't know, I'm wondering what you're talking about.
You're telling me you're all mad at them for not buying the token back, or maybe that's what we're watching for buy by a buyback to be announced on certain tokens.
So uh maybe we'll hunt maybe that's the alpha is hunt for tokens where the team may announce buybacks at some point.
I feel like that alpha's kind of done though.
I feel like that that that method is.
Yeah, that's just I think it's it's we should not be trying to predict these sort of things.
It's like predicting when is the war in around gonna end?
You don't fucking know.
Yeah, you ever all these like armpit or like geopolitical analysts and military, like you don't fucking know.
You're reading the same propaganda new news that everybody else is reading.
You all read we all read the same history books, you know, with the same rose tinted glasses about who won and who lost.
So don't tell me what you know.
Just wait for them to do the thing.
They bomb or they don't bomb, they print or they don't print.
Trying to time this, yes, maybe you get it right, but a lot of the chance you just add volatility or portfolio, and when it goes against you, you're just gonna dump it, and then you're just gonna keep doing this over and over again and just depleting your capital base.
Just wait for the product project to announce the buyback and then buy it.
You might miss the first 20%.
Who cares?
At least you're not gonna lose 50% of your money when they don't announce it.
So I think no, just wait, just be patient.
Okay, Arthur, last question for you.
Uh, right now where we're chatting, Bitcoin's sitting at 69,211 in a month from today, higher or lower.
Ooh, a month for today.
Uh I say higher.
Higher.
Significantly, or still ranging, still ranging in the I still I think it's it really depends on this Fed meeting, right?
If Trump's still fighting a war and around and the Fed takes it as the opportunity to provide money, then you know we could be higher.
Um if that doesn't happen, then you know we probably could be about much lower.
Beauty.
Awesome.
Arthur Hayes, great to see you again, man.
Thanks for coming on the show.
Thank you.
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