Arthur Hayes is an extremely knowledgeable figure in the crypto space, most known for founding BitMEX, sharing his thoughts in his blog posts, and more recently founding 100x.
Today he appeared as guest on the Unchained Podcast, to discuss the merge with host Laura Shin.
What does Arthur Think of the Recent Events in Crypto?
● Recent events are nothing new, similar to Mt. Gox collapse, ICO bubble
Previous Outlook on ETH
● Didn’t see value in investing in the presale for an asset that didn’t have a scarce supply
● Dapps on ETH collectively valued more than ETH itself
● Concluded that ETH is undervalued relative to ecosystem value built on top of it
Thoughts on ETH today
● NFTs represent community, culture but aren’t driving throughput the same way DeFi is
● ETH doesn’t need deflation today, just reduced inflation will increase price
● Alt L1s might be able to scale better then ETH but they have other trade offs
● Merge trade is unique to ETH, no other chain has opportunity where inflation will be significantly reduced and chain will move from PoW to PoS
● If demand for Dapps on Eth remains the same, lack of scaling on ETH doesn’t really matter
● Unlike BTC, ETH is not meant to be money, changes are made to the protocol if it is thought that they will help users
● ETH is a commodity, goal is to be a decentralized computer for the world to use
● Price appreciation to an extent hurts users with potentially higher gas prices
● People with ETH are hedging their positions as there is always a risk that the Merge doesn’t happen or is delayed again, reason for ETH backwardation: futures prices lower than spot
Thoughts on PoW Fork
● ETH is valuable because people use it
● Most people will not care enough to use ETH PoW, they just want to use the ETH dapps they are accustomed to
● Major services that average users enjoy are not available on PoW, people probably won’t be inclined to start using PoW because it becomes very complicated to use
● BSV, other BTC forks have always under performed BTC because most people just don’t care about them
● Will try to sell his PoW coins at the best time
Macro / BTC Outlook
● BTC more tied to USD liquidity, as it is a pure alternative to fiat money
● BTC has still worked as an inflation hedge, only in this particular time frame can people claim it has under performed USD
● Thinks draining of liquidity will drag everything down, ETH merge is unique opportunity for relative supply and demand changes to overcome negative macro environment
● Seeing BTC reacting strongly to credit collapse, will likely remain correlated with macro economy for some time
● Institutional buyers just buy the tops and sell the bottoms, because they face the career risks of not being allocated when BTC goes up, or being too invested when it starts going down
● Can forget about earnings, BPS hikes, etc. just analyze whether there is more USD available to be leveraged
● Fiat currency is the same as an algorithmic stable coin but with the threat of violence behind it
● Credit being leveraged is the root of all crashes
How do you Find New Projects to Invest in?
● Uses token terminal, finds the projects with highest 7 day revenues
● Focuses on earning yield
● Focuses on investing in infrastructure if he doesn’t fully understand a sector, e.g., investing in NFT marketplaces instead of NFTs themselves
Arthur on his Writing
● British, Russian literature classes helped develop his writing
● Writing allows him to evaluate his conviction in an idea, sometimes will sell positions are writing about them and realizing that his logic was flawed
Thoughts on Maximalism?
● Money is a myth, different people give different forms of money value, like religion
● How much people believe in a certain form of money or unit of account varies per asset
● Maxis extrapolate features of monies to the maximum, e.g., USD is still required to pay taxes, it’s not completely useless just because of inflation as many claim
Laura
● Writing isn’t the act of typing, it is the act of clear thinking