Full Text of Arthur Hayes’ Token2049 Speech in Singapore The Next Bull Market Will Start in Early 2024

Arthur Hayes' Token2049 Speech Next Bull Market in Early 2024

“The simultaneous outbreak of currency liquidity and ecological technology will usher in the largest bull market in the field of risk assets since the Great Depression.”

Speech topic: “Money Printing, AI, and Crypto: Fueling an Epic Bull Market Mania”

Recorded on site: Logicrw

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Translation: Kaori, czgsws

On September 13th, Arthur Hayes, co-founder and former CEO of BitMEX, gave a speech entitled “Money Printing, AI, and Crypto: Fueling an Epic Bull Market Mania” at Token2049 in Singapore. BlockBeats reporters recorded, organized, and translated the contents of the speech. The full text is as follows:

In this speech, I will discuss debt and AI from a macro perspective, and then narrow it down to a micro perspective to briefly introduce why I am very fond of Filecoin. Again, I want to remind everyone that this is my broad framework for the value of cryptocurrencies, namely the liquidity of fiat currency and certain technologies of the ecosystem. In the past decade, one of these two factors has always been the reason for us to start a bull market, but we have not yet encountered a bull market where both of these aspects occur at the same time.

Now I want to explain why I believe that the next bull market may start in early 2024. This will be the largest bull market in not only the cryptocurrency field, but also the field of risk assets since World War II and the Great Depression.

Fundamentally, what is GDP? I got this saying from Robin Paul, which is population growth, productivity, and debt. I want to focus on babies (population and population structure) and debt (money printing). In simple terms, rich people don’t have many children. There are many reasons for this phenomenon, but if you look at the relevant chart data, you will know that we are actually entering a population growth deficit, which brings a very big problem. Ultimately, we are borrowing from the future, building today, and hoping that there will be more people in the future to fill this growth so that they can continue economic activities.

So, when there are not enough children, who can drive this growth to repay the debt? What solutions have central banks and governments proposed to address this problem?

How do we maintain GDP growth? By printing money.

Since 1970, this is a World Bank chart on global debt and GDP. We have increased from 110% to 360%. The worst part of this chart is not just the terrifying 360%, but also the chilling acceleration. It took us 10 years to increase the growth rate by 100%, while during the COVID-19 period, it only took us two years to increase it from 250% to 360%.

From a global perspective, we are in the late stage of a debt crisis. Why is debt unsustainable? Every country has its own specific reasons, but at the global level, we can see that we are using accelerated debt issuance to make up for nonexistent growth.

Although we are in Singapore, we are in the US dollar system. The monetary policies of most countries are a reflection of the US financial policies, so I spent a lot of time discussing the Federal Reserve and financial policies.

If you are a holder of US Treasury bonds, this is a very scary chart. This is the maturity profile of US debt. By 2026, the US will have to roll over nearly $8 trillion in bonds and find people who are willing to accept this debt at current market yields. Now think about it, if the whole world is facing such a problem, that is too much debt and insufficient population growth, how will they do it? Who will buy these debts?

When the government has a pile of debt to issue and no one is willing to buy it at a sustainable yield, what does the government do? They print money.

So, if I look at the issue of fiat currency liquidity from a global perspective and the perspective of the US as the issuer of the reserve currency, this will be the largest currency issuance market we have ever seen, but no one here is willing to buy these things at these yields.

Decentralized storage in the AI era

Okay, now let’s switch gears from fiat currency to technology. What is the dominant topic today? AI.

Yesterday I attended a lunch with many global asset management companies, family offices, and wealth salespeople, and we sat around the table discussing what our most confident ideas or themes are. I think 75% of people mentioned something about AI. This is the trend.

In 2000, it was the internet that would dominate the world. There is always a major topic in each era. In 1929, it was radio and railways. Every cycle, we focus on some new technologies that will completely change the human experience. AI is no different. With the widespread use of computers and the rapid advancement of human civilization since the invention of host-to-host internet, you can understand why investors are so concerned about what AI can do.

Computers can think for themselves, so what changes will happen to our civilization? There may be trillions of dollars in value created by AI. Chat GPT has been a highlight in the past six months, and it is the fastest technology adoption in human history. Why are all these startups saying that we will apply LLM models to a specific area of the economy to increase productivity for companies using our products?

So what does this mean? Currently, the biggest stock in AI is NVIDIA. Since the launch of products that the public can consume, NVIDIA’s stock price has almost doubled, and its P/E ratio has reached 100 times. If you think about it carefully, this is absolutely ridiculous. How much money does NVIDIA need to earn in the next 5 to 10 years to justify its current valuation? Some may say this is a bubble, and I agree with that view, but I think it will get bigger.

So it seems that we have a bull market in fiat currency liquidity driven by a shortage of babies and a lot of debt, and we have a tech bull market driven by AI. I have written some papers trying to link cryptocurrency and AI. Fundamentally, I believe that AI is an individual economic unit, and if you want to personify it, it doesn’t care about human laws and regulations because the government cannot kill an AI with force. Yes, you can try to destroy computers and so on, but that would almost destroy the social connections we have. Therefore, I believe that a single government is almost impossible to unilaterally punish an AI, so, double happiness, we will have pets and AI as reasons to have cryptocurrency.

So what does AI need? AI needs computing power and data storage. When I think about my investment portfolio and how my family office can enter the AI field, I realize that I have missed the best time to invest in some of the emerging startups today. I won’t have liquidity in 2026 or 2027 because it takes five to seven years for a company to mature enough to launch its own product. So I need to find something that can land immediately.

Now, I can buy Nvidia stock at a P/E ratio of 100, but I can consider data storage and the angle that may be related to cryptocurrency. Some of the people in this room are venture capitalists, and I won’t say you are fools, but the person who put money in your hands may be a fool.

So what’s next? A bunch of venture capital firms will say, I’m going to do an AI fund. So you have to pay all kinds of fees, right? And then they will turn around and see billions of dollars in investment in any AI sales material.

So, if you don’t want to profit from the AI frenzy, I want to get into the flow of funds. These funds are flowing into these two areas because without these things, no matter what AI solution you claim, it will essentially not work.

Why does AI need decentralized storage? If I believe that AI won’t use a lot of data storage, shouldn’t I use Amazon? You put your data in a centralized company that can shut down your service because of government orders, change prices at any time because it’s their data center, and cancel contracts at any time. What will AI do? Will it sue someone in court? That’s not going to happen. Fundamentally, AI will create an opportunity for decentralized storage.

So now I need a shitcoin, I hope there is a listed token that I can buy, this token has completely collapsed, falling more than 90% from its historical high in 2021, the most active sellers have sold off completely, so when this token starts to rise, it still has a lot of room to grow, and the funds entering don’t need much to make this token rise for 10 or 20 years, and it also needs to be related to the AI industry chain.

Selected Filecoin

Filecoin is considered a worthless cryptocurrency, falling from its peak of $300 to $3, a decline of nearly 99%. However, people are still using it.

There is data on the Filecoin network, and real customers are using this system. There is still a lot of room for development in the market. Although AWS is a market leader, it is a centralized solution. If end users value the benefits of decentralized data, then there is room for development in the decentralized storage market.

I have invested in a Filecoin storage platform called Seal Storage, which is helping to bring large data users into the Filecoin network. They have a project called Atlas, which is a data project of the European particle accelerator, CERN. They are using SEAL to reduce data costs and gain Filecoin rewards by putting this data on the network. The University of California, Berkeley is also doing similar things with SEAL, and SEAL has collaborative projects with NASA and other universities in the United States.

I hope I have briefly explained the reasons why I believe Filecoin will rise significantly. I hold Filcoin.

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