In his last essayArthur Hayes, co-founder of BitMEX, presented his guide to investing in the current global economic landscape, focusing on the potential of Bitcoin, cryptocurrencies, big tech and traditional financial markets.
Hayes begins with a blunt critique of traditional investing strategies, particularly buying long-term bonds in today’s economic climate. He explicitly states: “The stupidest thing anyone can do is buy long-term bonds with a buy-and-hold mentality.” »
Hayes explains this view by highlighting the risks associated with these bonds, particularly when liquidity conditions change, saying: “You will experience a market-to-market gain today, but…the market will begin to ignore the impact new repos. [RRP] the balance decreases and long-term bond yields will rise, meaning prices will fall.
Moving on to smarter investment approaches, Hayes admits to relying on short-term debt, as exemplified by Stan Druckenmiller. Hayes notes that Stan Druckenmiller opted for 2-year Treasury bonds. He remarked: “Great business, brah!” Not everyone has the courage to hear the best expressions of this profession (hint: it’s crypto). Therefore, if all you can trade are manipulated TradFi assets like government bonds and stocks, then it is not a bad option.
Hayes also argues that a trade “that’s a little better than the averagely smart trade (but still not the smartest) is investing in big tech.” Hayes focuses on AI-related businesses. He identifies AI as a crucial future technology, saying: “Everyone knows that everyone knows that AI is the future. This means that everything related to AI will grow, because everyone is buying it too. Tech stocks are long-term assets and will benefit from cash being trash again.
Smart Trades: Bitcoin and Crypto
However, the smarter trade is to go long crypto, which has significantly outperformed other assets relative to increasing central bank balance sheets. Hayes presented the chart below, comparing the performance of Bitcoin, the Nasdaq 100, the S&P 500 and gold against the Fed’s balance sheet since March 2020, highlighting Bitcoin’s exceptional growth.
Hayes identifies Bitcoin as the primary investment target, describing it as “money and only money.” After Bitcoin, it designates Ether as the product that powers the Ethereum network. “Ether is the product that powers the Ethereum network, which is the best computer on the Internet.”
He categorizes other cryptocurrencies by stating: “Bitcoin and Ether are the reserve assets of cryptocurrencies. Everything else is a shitcoin. He further expands on alternative layer-one blockchains like Solana, calling them “all overrated, me-too, bullshit that won’t surpass Ethereum in terms of active developers, dApp activity, or total value locked.”
Hayes also discusses decentralized applications (dApps) and their tokens. He finds this sector exciting because of its high return potential, although he recognizes the risks: “Eventually, all kinds of dApps and their respective tokens will develop. This is the most fun, because this is where you get 10,000x returns. Of course, you are also more likely to become robust, but where there is no risk, there is no back. I love shitcoins, so don’t ever call me crazy! »
Regarding his investment strategy amid current economic fluctuations, Hayes explains that he focuses on the net of RRP less Treasury General Account (TGA) to assess market liquidity, which informs his decisions on sales Treasury bills and Bitcoin purchases. He emphasizes the importance of adaptability, saying: “I will remain agile and flexible. The best-laid plans of mice and men tend to fail.
Hayes also delves into geopolitical considerations, particularly the potential impact of the Hamas versus Israel conflict on oil prices and monetary policy. He notes Bitcoin’s resilience in such scenarios: “Bitcoin has proven to outperform bonds in times of war. […] The long-term US Treasury bond ETF has fallen 12% compared to Bitcoin which has risen 52% since the start of the Ukraine/Russia war.
Although he admits that Bitcoin could initially fall when Iran is drawn into the Hamas war against Israel, this would be a “buy the dip” situation according to Hayes.
In a frank conclusion, Hayes comments on the historical context of geopolitical conflicts, expressing skepticism about the prospects for world peace: “Of course, if the leaders of the Pax Americana were committed to world peace and harmony… no, I’m not even. I will finish this thought. These mofos have been practicing war since 1776, with no sign of stopping.
According to Hayes, however, all roads lead to Bitcoin: “[It] will reassert itself as a real-time dashboard on the health of the wartime fiat financial system.
At press time, BTC was trading at $37,030.
Featured image from South China Morning Post, chart from TradingView.com