The Next Bull Market Will Be The Biggest One You've Ever Seen (The Full Picture)

Transcript

He's the maverick of modern finance, co-founder of BitMEX, former Wall Street trader turned crypto visionary, and one of the most influential voices in digital markets today. Known for his bold takes, deep macro insights, and unfiltered commentary, Arthur Hayes doesn't just predict the future of finance. He helps shape it. Just like the streets of Manhattan, I'm going to keep this quick. Over 70% of our viewers are not subscribers. Yes, you. Every week, we interview some of the best entrepreneurs and investors in the financial industry. The easiest way to support our channel is to hit the like and smash the subscribe button. Now, sit back, relax, and enjoy today's show. All righty, Arthur. Good to have you back, man. Uh, welcome to the bull market.

>> Let's go. >> Let's get it. We're up. We're alive. Uh, vibes are back. Onchain is going berserk. Majors are ripping. Institutions and AI bros are still sidelined. And here we are. Um, I was actually just out at Jackson Hole last week and I was there for the Fed meeting and you know let >> Yeah, I don't know how it was quite a movie experience. I don't know how I did it. You know, I was hiding out just in my hiking gear actually. I was like, is there an event going on here? Anyway, Wars comes out with the rhetoric about two hikes in the like the very beginning about two hikes in Jackson Hole that he's done. One being very hard, one being very chill. And the market responds this week absolutely ripping.

Where are we at in the macro state, Arthur? We got uh Scott Bessant doing his thing. Worsh doing his thing. What's your read on the macro? >> So number one, Worsh is irrelevant. It doesn't matter. >> Uh and I know he gave that speech what, two weeks ago, week ago, whatever it was. And what really happened, I think, last night and going in is it's, you know, euro euro yen. I wrote a whole piece about this and this is my new hobby horse, right? And it's usually Japan has something to do with everything in global financial markets in this uh modern era. So basically starting in mid July, late July what it was, Ministry of Finance person Kayyama in Japan basically stated that domestic

institutions and she was really saying the GPIF which is the largest pension fund in Japan, quasi government institution need to re-evaluate their ownership criteria and own less foreign assets and buy more domestic Japanese assets. Now she said this at the time Delian was I don't know 162 163 and everyone's like okay great we all agree but like what are you going to do about it? Is there going to be some sort of impetus from the government to force this to happen. The last time there was a major change in the asset allocation of GPIF and then downstream everyone else follows that's individuals as businesses was in 2012 AB prime minister um Abbe came out and said this is Abnomics which is just printing money

and we want the GPIF to change their asset allocation to favor foreign securities more than domestic right and it took him two years to get the formal agreement from the GPF ministers and basically what he did is he had stack the deck, remove the people who were obstinate, put his own people on. It took two years and then the GPIF came out with their framework on how they would um own more foreign, less domestic. And then you see the market start taking off. DY Yen weekends, you know, Japanese people just start investing abroad, everyone else follows on, right? Whole thing. So this time around, I was like, "Okay, well, great.

GPIF in two to three years might start selling US treasuries and and buying GTBs." Cool. Whatever. Don't care. You guys have been talking about this [ __ ] for too too long. We're going to fade this. Right. Then you have the the first yen intervention where best sell euros buys yen. Talks about how the FEMA repo facility needs to be uncapped. Hint hit war. Do your [ __ ] job. Lick my dick. Do what I say. Right. And uncap that caret party limit to to be uncapped. And then people like the GPIF can essentially instead of selling treasuries, they can get a loan from the Fed. The Fed prints dollars. They take the dollars, they sell them in the forex

market, they buy Japanese yen, they come back to Japan. Great. Okay. Again, another piece of the puzzle, but somebody else still needs to do this, right? Wars need to still call the financial subcommittee. They still need to agree to do this, right? Then we have the the Treasury buyback upside. Hey guys, I'm going to increase the Treasury buybacks by 20 billion. I'm really really serious. Okay, who cares? Four trillion 40 trillion debt market. Not really something going on here. Okay. And and then Besson comes out last week or earlier this week saying, "Hey BJ, you need to raise rates faster than you have been doing." Again, not like no one has said this before.

You're not the BOJ, Bessant. Like, what are you going to do about it? And then we have sort of the the G 20 this week meeting. I don't know where it's where it's it's happening, right? And you can assume that something happened, some agreement happened on the sidelines where I guess they finally got the [ __ ] message. Bloomer reports yesterday in Asia time that GPIF had an unscheduled meeting in August, right? August is a holiday month in Japan. Japanese, you think Americans don't like doing work on the holidays? [ __ ] Japan don't do work on a holiday. Nobody does [ __ ] on the holiday, right? And so the the fact that they called this unscheduled meeting, we don't know what they talked about is during the G20 after the government told them to buy more Japanese stuff. Besson, you know, their security daddy is telling them to

buy more um Japanese stuff and sell American. They have this unscheduled meeting and then dollar yen goes from 60 to 55 in a trading session. It's this ungodly massive move. Dollar, you know, Euro JPY loses like three big figures during Asian trading. Um so I think that they there's going to be an announcement soon that number one either FEMA repo facility has increased the cap right that GPIF has undertaken to change the essentially waitings of foreign and domestic um stuff and obviously crypto and everything overnight woke up to this and you get this sort of waller speech

about oh hey inflation's not so bad maybe you know we shouldn't be be hiking rates so you put all this together and it's like, okay, we want to weaken the dollar and strengthen the yen. Like this has been the number one goal of the Trump administration, right? They want to re revamp this trading architecture globally. Number one thing you need to do is yen needs to be stronger. It's the most undervalued currency next to the yuan, but they can't really do anything to China where they can do stuff to Japan because they depend on the American security umbrella. And so this is why I think crypto ripped because we've seen we've been digesting all of the inputs and finally something has happened. Something has to have changed.

You don't just move, you know, from 160 155 on no news given all these things that have led up to this. And so that's why I think that it's game on. And then you get sort of crypto and all these other things ripping overnight when the S&P was what flattish um to down. You know, tech's not really doing that much in terms of the AI trade. like this is all a liquidity story and I think we're going to you know over the next days and weeks there's going to be reveals okay this is what was actually agreed at the G20 and it's as we thought there will going to be things put in place to essentially print dollars to dump the dollar and pump the yen >> love it absolutely love it and dump the dollar means pump our bags so

>> correct >> you know I think there's a lot to dig into but one of the things that I didn't see mentioned in your latest piece. Obviously, Japan is sort of like part of this whole story in a big way. And a lot of times when people think about Japan and the yen, they think about this carry trade or this basis trade. Can you just tell us like is that relevant to the story that you're describing? If so, what are the implications for that? Cuz people are saying that as the yen does what it's doing, this is what breaks. So, the Japanese society, I call it Japanese Inc., they run the biggest yen carrier trade globally, right? And so if you take a look at the actual consolidated balance sheet of Japan and you include the the assets of the private sector, essentially what they

have been doing is printing yen and buying foreign assets. And so as the yen weakens and your US tech pumps and you know all these different things that they own, right, versus appreciating yen, Japan as a whole does very very well. I know people want to focus on this like one metric debt to GDP and all this, but like you need to think about Japan as one whole entity. As much as they say that they're this capitalistic society, it's a very communal socialist society and they just have this veneer of capitalism because America runs the the country essentially. Um but at the end of the day, that's not how Japan works. There is Japan Inc. and this is a

global or a countrywide trade. they have the largest carrier trade um participants and so when the GPIF has been instructed to go the other way now Japan is going to go okay cool now it's time I sell my bonds I sell my stocks I sell the foreign currency I buy the yen I bring back the yen I invest in JGBs I invest in local companies I invest in local real estate right this is what the the directive has been from the government yes it takes a little bit of and to get going, but once it gets going, you don't want to be in front of that train. Now, the problem for the US is that they owned all these assets and they pumped the markets for the last,

you know, 30 years. So, how do you sort of unwind that trade when your entire empire depends on this financial tax that you charge people for the stocks going up and for the amount of debt that you issue? Well, you basically say, "Okay, I'm willing to print money and run the opposite run the same trade Japan said. I don't care if dollar goes to 200. I guess want to reflate my economy and basically inflate my way out of this property bubble that I had in the 1980s. So the US says, okay, I don't care if DXY goes to 50. I just need to become an industrial powerhouse again and I need to reduce my DUT DDP by from 100 to to 30 back where it was um after the last time they did this. Right? So

that is it's the same trade. It takes a long time, but once it gets going, then you can't really be in front of these moves. >> Then Arthur, one of the things that War said, and I know that, you know, you said he's kind of irrelevant here at Jackson Hole was AI, AI, AI, this disinflationary AI, AI, you know, innovative tech. And then at the end of the speech, he goes on to say about all these inflation concerns. He's he's all over the place, right? But the key here is that people are talking about this rotation. And what you're describing here is the beginning of a broader rotation that we were in very accommodative financial policy postcoid like extremely accommod I mean overly accommodative right obviously for the

last four years we've been in higher interest rate environment QT only ended I mean sixish months ago if you look at the actual balance sheet it flattened out and you know started to kind of actually go up. So the broader macro shift here that I think is what you're kind of hinting at with this Japanese yen situation is that the US financial policy is entering into the more easing/accommodative policy frontier or regime and it really hasn't been like this since co is that like the right way to think about it obviously different scales here but like really on the macro picture are we kind of exiting that restrictive you regime into a more accommodative one

>> restrictive. The the monetary situation was only restrictive from let's call it December 2021 until October 2023. That was restrictive. Um then once Bad Girl Yellen started issuing more bills and bonds and drain the reverse repo facility of 2 and a half trillion, you know, it was rockstar time again for all of us crypto and asset holders. And then obviously the as you said the AI trade is their sort of get out of jail or free card. It's like hey you know we really printed a lot of money over the last 50 60 years and you know under normal you know math this exponential increase in uh interest bearing cost and and the size of the debt it would practically be

impossible to grow our way out of it. But we've got this magical new thing called AI. And you know, if we just do AI and we we win the AI war against China, then all of a sudden all this debt's just going to disappear and we're just going to be so productive and all this, you know, yada yada yada. It's great, right? And so this is why Wars, Trump, Bessant, every everyone is AI, AI, AI, AI because this is the only way that they can basically sell to the voters. It's like, hey, don't worry about how much money we're spending. Don't worry that we're spending more money um per point of GDP than any other time other than a war or a pandemic, right? Don't worry about that cuz we got AI and we're going to win AI. What the [ __ ] does AI even mean? Like these

[ __ ] don't even know, right? They just got sold some [ __ ] dog [ __ ] by Dario, Sam, and Elon and they said, "Okay, we need a bunch of debt. We need, you know, government cover. You know, AI, AI, AI. It's going to solve your problems. Sell this [ __ ] to the public." I said, "Okay, cool. Whatever." And the AI thing feeds into the same the same sort of trade, which is if AI is their only way of saying this is how we're going to solve the deficit issue, don't worry about spending. Then if these AI companies come under pressure because the unit economics of these large labs don't actually make any [ __ ] sense, then what do they do?

They bail it out. What do they do? How do they do that? They print some more money. So it's the same trade. Say, you know, the Japan trade architecture European thing that's going to print some money. And then the AI cut save your face because you essentially just blew few trillion dollars on a [ __ ] hallucinating chatbot. Like that is also going to be the reason why you pump a bunch of money into the markets. So we have these two things together which are really going to to help crypto go to new highs. >> Yeah. And then just one thing that that I like to throw your way because I know Rob's got a ton of things on the macro side and market side is in the last I don't know six to 18 months the fiat debasement trade like angle for Bitcoin was dead. I mean it it did not perform

well but gold did and tech absolutely demolished all markets AI capex memory all these little things but the shift that you're describing seems more favorable to gold bugs and bitcoiners and fiat debasement type of assets versus outright tech assets. Is that correct? >> Yes. And I think right now we're starting to the my friend just sent me the new cover the economist and it's like Jensen is this magic Jensen the CEO of video is this magic wizard and Nvidia no there's no cash flow problems here no no there's no circular financing vendor financing chicainery going on in their accounting like Enron 2.0 I know, but but an AI chatbot. No, no, no. None of that's happening. This is the best

company that's ever existed. Okay, great. That's the top of the market there. Thank you very much. Let's [ __ ] go. Cuz like when the economist is telling you something, do the other thing cuz they're a bunch of [ __ ] muppets. Uh and so like like this is like amazing. It's the best setup because now the politicians can't not spend the money because I would admit that they made a large mistake and that would feed into all this like data center angst, this sort of, >> you know, too much social media. The tech companies stole our data. Like you'd have to admit to all of that stuff. If you say, "Okay, you know, we we kind of [ __ ] up in AI. We got to go a different way. Maybe we shouldn't be government backs stopping this. you know, we're not going to ban anything,

but like Elon and Co and earn your cost of capital. There's no government bailout for you. There's no like special regulations. There's no like US versus China nationalistic nonsense to like make sure that we invest more money in money losing enterprises. No, you either make money or you don't. And please tell us not your [ __ ] revenue numbers anthropic. Like how much money do you actually make? And if you burn money, what are the uni economics on inference? Me as a potential IPO investor in the secondary market, right? Let's hear about that. So I think this is something that's never going to happen obviously because that's not how politics works.

But it's that's why Bitcoin and gold and these other assets do well is because now you're in the capital wastage phase where you're going to take a bunch of printed money and throw it at all these loans to roll them over to cover the mistake that you made because you can't admit that you blew a bunch of money. >> So basically, you know, like the politicians can't help us spend the money. They spent it before on AI. M2 goes up, but none of that flows into our bags, right? Crypto assets. And so you know what you're saying now is that the allocation of money into AI is misallocation of capital that money does end up flowing into digital assets.

>> Yes. >> And is it is it the same is it like the same investor class or is it just broader macro investors, firms, funds, etc. Obviously clarity is coming up. Green light tokenization is all these kind of sectors that are hot. Is it like the same VCs exiting anthropic buying Bitcoin or is it more of just like a broader trend shift in your opinion? >> This is just balance sheet expansion by the central bank, right? And it's not like I can't tell you this person or that person is going to be buying Bitcoin. I mean, I think a lot of these VCs are going to get [ __ ] torched, right? Could they talk to talk to their investors saying, "Oh, I'm up some ridiculous amount of percent because I'm in these these labs." Right.

>> Right. And >> okay, maybe Anthropic goes public. They need to get their [ __ ] together and get like out there immediately because there's too many people asking too many questions right now, right? Open AI is [ __ ] Like they need they need a government bailout. They need some sort of like merger. Like, you know, Sammy boy is he's cooked. He's got to find he's going to have to come up with some like impressive financial engineering to to get this turd off the line. So, you know, it's all it's all Daario all the time. Let's see if he can pull it off. But I think a lot of these VCs, they're locked up, right? If this [ __ ] opens and then dumps like 50 60% and then liquidity evaporates unless a government bailout comes like I don't know how a lot of these guys are going to realize

that DPI that they've been touting to their investors. So like I don't see this. I know this is not this is not like oh the AI bros are going to invest in crypto. The AI bros don't have any money. They got some pieces of paper that they'll give you like but they don't have any money. And so like okay maybe if the the central bank is pumping the bags that way then they can get some money and somehow exit and buy crypto. I think just think of it as generalized balance sheet expansion to cover up the malinvestment. This is what Bitcoin was created for, right? In 2009, what do they do? Balance sheet investment to cover up the malinvestment in housing.

Period. End of sentence. So, it's the same thing but on a bigger scale. And this time, it's AI debt. >> Yep. Yeah. And so, you know, there's kind of a lot of moving pieces, but let's try to put it all together, right? There's all the AI founders you mentioned, Sammy, Daario, and and Elon, right? They kind of had their time in the sun. The government listened to them. You know, Trump obviously is out there. He originally started about repatriating and preaching nationalistic policies. Japan kind of took the bait. Now they're repatriating a lot of capital. Um, and then Bessant is out here and he's, you know, trying to finance the whole thing. So who controls the narrative right now in terms of like you know from my perspective it

seems like Bessant. It seems like what Bessant says goes in control here. >> Is it you know is it Japan? Like who's in control right now? Like it kind of seems like Bessant is the one that you know he's like all right Japan it's time to rep you know you want to repatriate now is the time. We're going to unwind the carry trade. I get it. You need to sell bonds. kind of seems like that's going to go against my broader strategy, but don't worry, we have Wars. He's going to play ball. We're going to be able to finance the bills. Like, I is he kind of the one that's orchestrating everything right now or do does it? >> He's a firefighter. The market the market sets the narrative. The bond market 480 on the tenure sets the narrative. JPY at 160 >> sets the narrative. And then Bessant is

the only capable lieutenant who can sort of say, "Okay, here are a bunch of spinning plates. Let me try not to drop any." And so we're going to do a he do heel deal here, deal there, whatever, right? And so like it's they're perfectly at the whim of the markets and they're trying to do the best that they can given all the imbalances that have built up over the past, you know, post World War II is really what this is is coming down to. This is the culmination of, you know, over almost 100 years of things that have happened. Everything is fed upon itself to get to where we are today. And so yes, you know, the individual politicians matter, but they also don't matter because at the end of the day, they can't beat math and compounding interest. You just can't beat it.

>> So that's who controls the narrative. Now, who controls the money printer? Is it the same person or is are these two different people? The people who control the narrative and the people who control the money printer? >> Um, I mean, technically speaking, Worsh is the Fed chair and he controls the balance sheet. He can print money, right? But at the end, but the end of the day, I think if you want some dry weekend reading, there's a there's a speech by former Fed chairperson Arthur Burns called the anguish of central banking and he was there's a 1979 given in Czechoslovakia. I forgot where it was, right? Um but he was the Fed chairperson before Vulkar and sort of has been excoriated by financial historians as the man who let inflation

out of the bag and all this sort of stuff. And the basically the point that he's making is that like all of us Fed chair people, we come into this job with all these beliefs about sound money and how we're going to safeguard the independence of the Fed and all this sort of stuff. But at the end of the day, we are still appendages of the American empire and the American people vote in politicians who spend money and have particular programs. Who are we to go against that? And so as much as you think that you're here to safeguard the independence of the Fed and the value of the dollar, you're really here to accommodate the spending that the American people have voted on. And so you will always print the money, you will always do what the president wants you to do. And this is borne out in

history. Republican, Democrat, doesn't matter. Doesn't matter what you said before you came in the seat. When you get in the seat, your boss always wants you to print money in some way, shape, or form. And so Wars, you know, was on the board of governors up until I think 2011. supposedly quit in protest to quantitative easing, talked a big game for the next 15 years while he was in the private sector and his opinion didn't [ __ ] matter. All of a sudden gets to the Fed. What does he do? He launches a task force. Oh, that's really sweet. You have a task force. Oh, what is the task force going to do? It's going to give you a report. Oh, report.

Oh, thank you. Thank you. >> The [ __ ] out of here. Morris is a Morris is 6. >> So you don't So you don't think he's going to >> mean handsome guy >> and you don't think he's going to cut in uh a couple in a week or two weeks? >> I think he's going to hold >> or excuse me, you don't you don't think Wars is going to hike in two weeks? >> No, I think he's going to hold. I think that they're going to essentially, you know, it's easy to it's easy to spin a narrative of, oh, some third derivative of some [ __ ] up [ __ ] government metric on inflation that includes nothing that people actually spend money on is going down. down in a year-on-year basis. So therefore, we can hold rates steady. But at the meantime, nominal

growth is what, an 8% last quarter in the United States. And so short on rates at 3 and a half to 375. That's how you do leverage balance sheet. This is textbook. And so by holding, he gets sort of, you know, hem and haw about, oh yeah, we're being hawkish and this and that. And then, oh no, this reserve management purchases is not real balance sheet expansion and quantitative easing because this technical thing about the repo market. you know, most [ __ ] American voters don't even know what the repo market really means. So, like, oh yeah, okay, sure. Um, so I like that's what he'll do. And then and Besson is going to be over here essentially spinning plates and trying not to have [ __ ] blow up in his face.

>> I agree because he also said that he hates forward guidance. He went on a five-minute rant in Jackson Hole about being anti-forward guidance. What's ironic is that he started Jackson Hole speech with a rhetoric about two separate hikes in the physical format that he went on. In my opinion, if he hikes in a week and a half, it will be a very clear or the market will see it as forward guidance, right? The market will be like, you literally gave two stories about hikes, you were all hawkish and then you hiked. You're you're doing you're doing exactly what you said you don't want to do. So, agree on that.

That's like left curve thought process. You're on the right curve. So, you know, happy to be in the middle here. But looking ahead, let's get bullish here. Let's get [ __ ] bullish. What does this mean? are we all-time highs end of the year Bitcoin? Are we ripping into the first half of next year? We had Will Clemente on big, you know, macro guy. He basically said he's never been more confident in the longer term in the sense that like he's very confident that the switches are being flipped and that, you know, short-term volatility is going to be here, but it's clear we're shifting into this financial repression.

So, let's think, you know, bigger picture here. Bitcoin, crypto, what's the timeline and what is your outlook here? >> I mean, I think we can maybe breach the all-time high by the end of the year, but I think at the end of the day, there's still they still can't give the game away too much before the midterm elections, right? The number one issue from American voters is affordability. That's what they care about. And so Trump's got to somehow square the circle on this one about how all these accommodative things that his people are doing is not printing money. And so I don't really know if Bitcoin at 500,000 the day before the election is really going to help him out too much. So as much as we would like that to happen

globally as people who own who own crypto. So like on one hand the structural factors that we've been talking about necessitate printed money and we know that's going to happen. But on the other hand, you've got these discrete political timelines that you need to manage to if you're a US politician and you can't have it be seen that you are promoting the Fed printing money because I think by this point in time most Americans think the Fed is this engine of inequality as Scott Besson said in the Wall Street oped Journal. Um, right. And so like there needs to be this illusion that they actually care about the purchasing power of this currency that you make as an American um taxpayer. So again, I'm super bullish. I perfectly agree

with your former guest. But I would say it's can be very very volatile and it's you know probably rips and then chop a chopa chop a bit you know maybe decline a bit and then rips and these sort of things as we sort of get step step step step by step towards you know this just money printing bonanza. >> Yeah. Which >> Rob says the oven is preheating right now. Right. Like the money printer is in the preheating phase. You know we haven't put the food in yet. The pizza's still in there. your girl still on the couch waiting for the food, but it's coming. It's coming. So Arthur, let's talk your your portfolio, your your positions. You wrote you took the biggest position perhaps ever in Ethereum. You still holding that longer

term outlook there? You know, our audience is going to say that you're just going to sell Ethereum on our heads after the show. Prove them wrong. What's your thesis here? How, you know, how long are you trying to hold your positions? What's your kind of portfolio? So obviously, you know, I think Ethereum is the most hated uh mega cap shitcoin, right? At the end of the day, if you want to strap on the most risk outside of Bitcoin and not be afraid that you're shit's going to dump 75% overnight because of some issue with the protocol, that's Ethereum. And thankfully, it's been the worst performing mega cap coin over the last cycle. Hasn't even out gotten past 5,000, its all-time high in 2021. So I think the riskreward setup is great for Ethereum which is why it's our larger

position going into this sort of liquidity rally and we also own some other things in the same sort of vein but obviously much smaller size like Ether uh Athena that sort of stuff. >> Yeah. Uh and so I I I actually want to build on a question that Andy asked around the timing of all this and you know also on the misallocation of capital point that you made earlier. Um cuz one thing that you said in your in your latest essay was that, you know, you were kind of explaining how Euroy yen is kind of the one thing to watch because it's the only number that is a leading indicator of a short-term increase in the pace of dollar liquidity creation. And so I think all everyone who understands the Bitcoin thesis understands dollar liquidity creation.

It's the debasement trade. That is everything. But shortterm increase in the pace of dollar liquidity creation is the second derivative. that is the acceleration of money printing. And so why I mean there's one question about why the Euroyen is the leading indicator of that. Um I that that's probably like that's kind of the place to start. It's like why is that the thing that is going to tell us that they're going to start increasing the money supply at a faster rate? And and also I guess the the second thing in that is is you know Bessant does a lot of signaling and the markets are forwardlooking and so you know there one of the things that he said in a

recent interview was like potential energy and kinetic and so by him signaling to the market that they're going to do these buybacks on these long-term bonds. you know, the the market's going to frontr run that and that's a ton of potential energy. And so, do you think we're gonna end up in like a, you know, buy the potential energy, sell the kinetic when these buy the rumor, sell the news type of thing when this thing ultimately comes to fruition? Or the kinetic is ultimately going to back up what he's saying. and we're we're going to see enough kinetic money printing that is going to send the market higher than it thinks is is the amount of money printing we're seeing based on the signaling. So obviously right now you know we've increased our

positions and things in advance of the Fed balance sheet rising at a very very you know COVID like 2009 like yeah it's still rising but it's not like going nuts relative to the past right which is why Bitcoin has really just gone from like 63,000 to like 80. Okay cool whatever don't care not a big deal. So how do you overcome the optics issues of the Fed balance sheet going nuts? You need a you need a real crisis. What is the real crisis on the on the yen side? You know, long yen of the euro yen pair. It is GPIF is selling [ __ ] You know, Nura is selling [ __ ] Um, Mrs. Watanab is selling [ __ ] right? Because the Japanese government said, "This is what

you must do." Okay? So, we need to lend them money. So, they don't sell it. They just, you know, repo it. That is one pillar of balance sheet expansion that makes the yen go up. What's the euro situation? The repo market. The large French banks led by BMP Pariba, Credit Agricult, and Society General, they are 20% of the repo market. This is from the Treasury. If we get a Euro issue, the market that's going to feel the brunt of it is France because the Japanese own a lot of French debt. If they can't sell the American [ __ ] because, you know, Americans got like 50 [ __ ] military bases in their country, they can sell

the European [ __ ] what are they going to sell? They're going to sell French stuff first. They're going to sell French OATS. They're going to sell French bank debt. Now, as the situation in France deteriorates, they cannot print money legally under the strictctures of the euro. But the new politicians coming in are like, "Fuck this. I am the president of France, not the European Union. I am here to do what the French people need, what the French nation needs. The French nation needs more money. The French nation needs to devalue within the stricture of the euro. So if I'm not going to leave the euro, then I just tell the bank to France to say, "Okay, [ __ ] it. I'm going to do QE in France, which is illegal under the EU's charter, but [ __ ] the EU.

I am here for France. I need to save my bond market." And the EU says, "You know what? I can print euros and save your bond market, but you're acting real bad. So, [ __ ] you, Le Pen. [ __ ] you, Milan, because you ain't licking my [ __ ] boots. So, I'm not buying your [ __ ] And so, this is a self-feeding prophecy where a soft fxit has to happen because both sides are unwilling to compromise based on the power structures that give them, you know, a right to be. And that's the short euro side.

And so if the French banks are exiting the repo market, we already saw the the Fed switch to quantitative easing in December of last year to essentially backs stop the repo market. The repo market helps finance treasury bills. Who issues the most treasury bills now? Scott [ __ ] Besson. And so it's all the same trade. So if euroy yen goes from I don't know 182 to like 140 120 there is going to be some serious issues in the French banking system that will have to be fixed with printed money. Printed money means the end of the euro because you can't have France print money unilaterally and not have it come from the ECB the in the center. And then if the French banks are getting owned because they're like,

well, why would I want to be in France if I'm going to get capital controls and you know, I'm going to get just this like pseudo euro lira, then I need to exit the repo market as a French bank. I need to concentrate my capital at home. And therefore, the Fed says, "Oh [ __ ] there's all this capital that needs that this balance sheet that I thought was there is no longer being offered by the commercial banks. Therefore, I must increase reserve management purchases." And I'm already doing it. So it's not as if and I can you know wave my hands to talk about duration and you know why it's not quantitative easing why it's so technical and you know hope that the American people are just too [ __ ] stupid to understand what I'm actually doing and like this is how you print

money from the short euro side and this is why I think the euroyen exchange rate tells us that both of these you know technical reasons why the Fed must increase money very very quickly is in play. Yeah, >> that's what gets us to $250, $500,000 Bitcoin, not just like Besson talking about what he's going to do. >> Yep. Makes sense. Makes complete sense. Um, and you know, it also has political cover because again, they're repatriating capital and they're doing it for the good of France. So, yeah, you know, it's going to fly with their citizens. Um, and so, you know, then the the the US is going to reciprocate and and uh, you know, Bessing kind of seems like he controls the economic narrative.

And I have a feeling maybe you nicknamed him Buffalo Bill Bessant because he issues a lot of bills. >> No, no, it's from the Silence of the Lambs. So, you know, Buffalo Bill, the serial killer. He's a serial killer of nations, right? You know, it puts the dollars on its skin or gets the sanctions again, right? You know, if you deal with Iran, we're coming for you like >> too good. So Arthur just kind of closing out then just to wrap the thesis give us just kind of you know succinctly how investors should be thinking about you know a portfolio in this change through this market structure. A lot of investors are you know obviously in our audience are cryptoheavy but a lot of people left crypto for AI. A lot of people got enthralled in the memory

trade and the capex and the trade. just from the investor perspective to kind of wrap this up, you know, how do we think about positioning a portfolio for success in this regime? Like it sounds simple, you know, I think I can probably have an intuition to your answer, but think more kind of like portfolio, you know, outside of crypto and including crypto. How do you uh kind of set yourself up for success? >> And and Arthur, one of the things that, you know, we've been talking a lot about on this on this show is like portfolio thesis, portfolio construction. It's a barbell. On one side, we have hard money scarce assets benefiting from the debasement trade through accommodative monetary policy. On the other side, we've got onchain businesses actually making money at decent fundamental PTE that are benefiting from Trump up there

with industry leaders shaking hands in CFDC innovation advisory committees benefiting from the legitimization of the industry. So part of I think what Andy's asking is like which side of that barbell is set to outperform? >> Yeah. And then also just broadly like other assets too. >> Yeah. Yeah. So I think if you're an AI person, you've made a lot of money in AI. You made a lot of money in AI because the rate of change or the rate of change was very was very high in 2526. That's over now. Now we're, you know, not to say that AI trades are not going to go up. They're just not going to go up as much because now we're in the is was this a good idea to invest all this money phase, which is usually where things top out. Now, you could get another 50, you know, 40 50% 60% rise in

the NASDAQ, but like Bitcoin's at a million or gold's at, you know, 15,000 or right, some sort of defense, you know, Exxon Mobile triples, right? Like, so like I think AI goes up, but it doesn't go up as much as other things. And so, you know, pick those other things based on your own sort of intellectual biases. Obviously, I'm in crypto. I think Bitcoin in this complex is the fastest horse. That's an on one side of of the bar. The other side is okay, what happens when people believe that the politicians will no longer print any money. I don't think that starts happening until sometime in 2028 when you start to have, you know, the US

presidential elections. And what I think is going to be the narrative of the opposition Democrats is, hey, guess what? We're going to increase taxes because, you know, all these rich people made all this money, yada yada yada. You know, you're poor. Inflation went up. So, let's just raise some taxes, right? Now, whether or not they do it is not the point. The point is we're going to be scared that they they'll win because most likely they will win because it's just a it's a ping-pong sort of situation. And that might be the oh [ __ ] maybe they're not going to print as much money as I thought. And then you want to be on the other side of of the barbell.

>> Yeah. >> Now, for me, I I have a large stake in a volatility hedge fund that basically has those types of trades, but in sort of optionality terms. But you can construct that with other types of businesses that you believe um do well when the money printer is turned off and you believe that, you know, money will get tighter again. Yeah, we think about that the debasement assets in crypto or sorry yeah that's out of the barbell Bitcoin Zcash much more reflexive right lot higher ceiling but can be you know especially Zcash can pull back hard hyperlquid etherfi some of these others now that they're you know through investor unlocks good tokconomics buybacks higher floors higher floors but probably lower

ceilings because fundamentals can only stretch you so far you got to scale that business to scale that you know stock price or that token price and So that's kind of how we've more or less thought about it. I I got to say though, man, the you know, we've done podcasts for years now. And you know, with you and the industry is firmly in the we have something to show for ourselves camp. That's why we're out of the bear, right? Obviously, you got all this policy stuff, but tokens are out of the bear because we feel like we have something to show for ourselves, right? We have businesses, we have tokens that are doing well, etc. And so just a new industry, man. Um and a lot of the a lot of the old heads, if you will, have left. I mean, you know, they made their

bag and they're out. But it feels like, and this is analogy that I've heard from, you know, other folks, feels like we're in the 2001 moment of the do-com bubble after the initial big run up and crash where you just kind of had these assets that were up only for now has been 25 years. And it's slow and it's a grind and there's a lot of deep pullbacks, but it feels like we're entering that kind of maturation phase of the industry. still going to be cyclical, but it feels like the industry is long in terms of its production and exports and then hopefully, you know, asset prices too. So, it feels like we're, you know, this time's always different, right? And it never is, but um it does feel like we have a lot more substantiative value in the industry

than prior. >> Cool. Yeah, I hope so. >> Well, let's get it. Thanks, Arthur. >> Let's go. >> So, good show, man. >> So, where are you buying your Zcash back? >> Yeah, exactly. That's that's that's that's a more uh well hype again riskreward. I don't think Hype has a good riskreward. >> I'll see. >> Not that it's not going to go up too, buddy. >> It's going to go up for sure, but like is it going to go up faster than Athena for the same amount of risk capital at risk? Right. >> I hear you. >> I don't think so. So that that's my my uh hyperlquid Zcash. We'll see how the formal verification and all that sort of stuff goes.

>> Yep. All right, Arthur. Thanks for your time, man. Boom. Awesome show.