Speech topic: Money Printing, AI, and Crypto: Fueling an Epic Bull Market Mania
Live collection: Logicrw, BlockBeats
Content compilation: Kaori, czgsws, BlockBeats
(Any views expressed below are the personal views of the speaker and do not form the basis for making investment decisions, nor should they be construed as a recommendation or recommendation to engage in investment transactions.)
On September 13, Arthur Hayes, co-founder and former CEO of BitMEX, gave a speech titled "Money Printing, AI, and Crypto: Fueling an Epic Bull Market Mania" at Token2049 in Singapore. BlockBeats reporters reviewed the speech Collected, organized and compiled, the full text is as follows:
In this talk I will talk about debt and AI at a macro level, and then zoom out to a micro level and give a brief introduction to why I like Filecoin so much. Again, as a reminder, this is my broad framework for the value of cryptocurrencies, namely the liquidity of fiat currencies and certain technologies of the ecosystem. Over 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 experienced a bull market with both aspects at the same time.
Now I want to explain why I think the next bull run will likely start in early 2024, which will be the biggest bull run not just in cryptocurrencies but in risk assets since World War II and the Great Depression.
Basically, what is GDP? I got this from Robin Paul, which is population growth, productivity and debt. I want to focus on babies (population and demographics) and debt (money printing). Very simply put, rich people don't have many children. There are many reasons for this phenomenon, but if you look at the relevant charts and data, you will know that we are actually entering a population growth deficit, which brings a very big problem. At the end of the day, we are borrowing from the future and building today. It is then hoped that more people will fill this growth in the future so that they can continue to be economically active.
So who can drive that growth to pay off the debt when there aren't enough kids? What solutions have central banks and governments proposed to address this problem?
How do we keep GDP growing - print money.
Since 1970, this is the World Bank's chart of global debt versus GDP, we've gone from 110% to 360%. The worst part of this chart isn't just the terrifying 360%, the acceleration is equally chilling. It took us 10 years to increase growth by 100%, and during COVID-19 it only took us two years to increase it from 250% to 360%.
From a global perspective, we are in the late stages of a debt disaster. Each country has its own specific reasons why debt is unsustainable, but at a global level we are seeing accelerated debt issuance to make up for non-existent growth.
Although we are in Singapore, we are in the US dollar system and most countries' monetary policy is a reflection of US financial policy, so I spend a lot of time discussing the Federal Reserve and financial policy.
If you're a holder of U.S. Treasury bonds, this is a pretty scary chart, this is the maturity profile of U.S. debt. The United States has to roll over nearly $8 trillion in bonds by 2026, and they have to find someone willing to take that debt and the prevailing yields in the market. Now think about it, how are they going to do this if the whole world is faced with the problem of too much debt and not enough population growth? Who will buy the debt?
What does a government do when it has a bunch of debt it needs to issue and no one is willing to buy it at an affordable yield? They will print money.
So if I look at the fiat liquidity issue from a global perspective and the U.S. as a reserve currency issuer, this is the largest currency issuance market we've ever seen, but we don't have anyone here willing to buy these at these yields thing.
Decentralized storage in the AI era
Okay, now let’s move from the fiat currency side to technology. What are the dominant topics today? It's AI.
Yesterday I was at a lunch meeting with a lot of global asset managers, family offices, wealth salespeople, and we were discussing around the table, what are the ideas or themes that we have the most confidence in? I think 75% of people mentioned something about AI. This is the trend.
The year 2000 was when the internet would rule the world, there is always one major topic in an era, 1929 it was radio, railroads. Each cycle we focus on new technologies that will revolutionize the human experience. AI is no different, because of how ubiquitous computers have become and how quickly our civilization has advanced since the invention of the mainframe computer internet, you can understand why investors are so concerned about what AI can do.
What will happen to our civilization if computers can think for themselves? There are potentially trillions of dollars in value that will be created by AI, and Chat GPT has been a highlight of the past six months, the fastest-adopting technology in human history. Why are all these startups saying, we're going to apply the LLM model in a particular area of the economy to increase productivity for the companies that use our product.
So what does this mean? The biggest AI stock right now is NVIDIA. Since it launched a product that the public can consume, NVIDIA's stock price has increased by almost 200%. NVIDIA's P/E ratio has reached 100 times, which is absolutely ridiculous if you think about it. How much money will Nvidia need to make in 5 to 10 years to reach its current valuation? Some would say this is a bubble, and I agree, but I think it will get bigger.
So it looks like we have a fiat liquidity bull market driven by not enough babies and a lot of debt, and we have a tech bull market driven by AI. I've written some papers trying to connect cryptocurrencies and AI, and fundamentally I think AI is a personal economic unit that doesn't care about human laws and regulations, if you want to anthropomorphize it, because governments can't kill them by force. Kill an AI. Yes, you could try to eliminate computers and so on, but that would pretty much destroy the social connections we have. Therefore, I think it is almost impossible for a single government to unilaterally punish an AI, so, double happiness, we will have pets and AI as reasons why we should have cryptocurrencies.
So, what does AI need? AI requires computing power and data storage. As I think about my portfolio and how my family office is getting into the AI space, I realize that I have missed the opportunity to invest in some of the startups that are emerging today. I wouldn't get 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 needed to find something that could hit the ground running.
Now, I could buy Nvidia stock at 100 times earnings, but I could consider the data storage and possibly cryptocurrency angle. Some of the people in this room are venture capitalists, and I'm not going to call you fools, but the people who put the money in your hands may be fools.
So, what happens next? A bunch of venture capital companies will say, I want to build an AI fund. So you have to pay all kinds of fees, right, and then they turn around and see hundreds of billions of dollars of investment in any promotional material with AI.
So, if I don't want to profit from the AI craze, I want to get into where the money is going. These funds are flowing into both areas because without these things, whatever your purported AI solution is, essentially it won't work.
Why does AI need decentralized storage? If I believe AI won't use massive data storage, shouldn't I use Amazon? You put your data in a centralized company that can shut down your service because of a government order, can change prices at any time because that's their data center, and can cancel the contract at any time. What will the AI do? Will it go to court and sue someone? This won't happen. Fundamentally, AI will create an opportunity for decentralized storage.
So, now I need a shitcoin, I want a listed coin to buy, this coin has completely collapsed, down over 90% from its all time high in 2021, the most aggressive sellers have sold out, so when this When a token starts to rise, it still has a lot of room for growth. It doesn't take much incoming capital 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 virtual currency. It has dropped nearly 99% from its peak of $300 to its current $3, and yet, people are still using it.
There is data on the Filecoin network, there are real customers using this system, and there is still a lot of room for development in the market. Although AWS is the market leader, it is a centralized solution. If end users value the benefits of data decentralization, then there is room for growth in the decentralized storage market.
I've invested in a Filecoin storage platform called Seal Storage, which is helping bring large data users to the Filecoin network. They have a project called Atlas, which is a data project at CERN, the European particle accelerator. They are reducing data costs using SEAL, which earns Filecoin rewards for putting this data on the network. The University of California, Berkeley, is using SEAL to do something similar, and SEAL also has collaborative projects with NASA and other universities in the United States.
Hopefully I've outlined briefly why I think Filecoin will rise significantly. I hold Filcoin.
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BTC becomes the currency of choice in the AI era
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