BitMEX co-founder Arthur Hayes says bitcoin The recent 52% drop from its October all-time high is raising a critical warning sign, but the cryptocurrency could ultimately hit new records once the Federal Reserve responds to an AI-driven banking crisis it believes is imminent.
In his latest essay, “This Is Fine,” Hayes argued that bitcoin’s divergence from traditional tech stocks reveals its role as a “global fiat liquidity fire alarm.” While the Nasdaq has remained relatively stable, bitcoin has plummeted from $126,000 to its current $67,000, pricing in what Hayes describes as a massive credit destruction event that stock markets have yet to recognize.
“Bitcoin is the free trade asset most responsive to the supply of fiat credit,” Hayes wrote. “The recent divergence between Bitcoin and the Nasdaq raises the alarm that a massive credit destruction event is approaching.”
Hayes models a scenario in which artificial intelligence displaces just 20% of America’s 72.1 million knowledge workers, causing roughly $557 billion in consumer credit and mortgage defaults, about half the severity of the 2008 financial crisis. This AI-driven shock would devastate regional banks and force the Federal Reserve to conduct “the largest money printing in history,” he predicts.
“Deflation is bad, but it is ultimately good for fiat credit-sensitive assets like Bitcoin,” Hayes said. “First, the market values the impact… Then… the monetary mandarins panic and press that Brrrr button harder than I mash pow the morning after a three-foot spill.”
Hayes pointed to gold’s recent gains, particularly against Bitcoin, as another red flag, stating that “a rising gold versus a falling Bitcoin tells us clearly that a deflationary risk aversion credit event is brewing within the Pax Americana.”
Hayes said that once the Federal Reserve intervenes with emergency liquidity measures, similar to the March 2023 response to the regional bank bankruptcies, bitcoin will “jump decisively off its lows” and the expectation of sustained money printing will drive it to new all-time highs.
That doesn’t mean there won’t be more pain for the foreseeable future, Hayes said. He warned that bitcoin could fall further before the Federal Reserve acts, potentially below $60,000, as political dysfunction delays the central bank’s response. Cryptocurrency investors, he advised, should stay liquid, avoid leverage and “wait for the Federal Reserve to give the go-ahead that it’s time to dump fiat and dirty apes into risky assets with unbridled abandon.”
