Arthur Hayes: Fiat debt and AI drive the next bull market (with PPT)

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

Compilation and compilation: Golden Finance

On September 13-14, 2023, the Token 2049 conference opened in Singapore. BitMEX founder Arthur Hayes gave a speech titled “Money Printing, AI, and Crypto: Fueling an Epic Bull Market Mania”. Golden Finance commented on this conference Conducted on-site follow-up reporting throughout the entire process, and compiled the content of Arthur Hayes’ speech as follows:

• Crypto industry = legal currency liquidity + technology

I will first discuss debt and AI at a macro level, then discuss a micro level and introduce why I like Filecoin. This talk is about my broad framework of cryptocurrency value, i.e. issues related to fiat currency liquidity and technology in the tech ecosystem. In the past decade, one of the two has always been the reason for us to start a bull market, but we have not yet experienced a bull market created by both at the same time.

Let me first explain why I think the next bull market will begin in early 2024 - it will be the largest bull market in cryptocurrency and even risk assets since World War II and the Great Depression.

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 (currency issuance). Rich people don’t have many children - there are many reasons for this phenomenon, as shown in the figure, we are entering a period of population growth deficit, which is a very big problem, we are borrowing from the future to build today and hope for the future More people come to fill this growth so that economic activity can continue.

But what if there aren’t enough children, how do we pay down the debt through economic growth? What solutions do central banks and governments have?

Our secret to maintaining GDP is printing money.

As shown in the figure, this is a World Bank chart on global debt and GDP, which has increased from 110% in 1970 to 360% in 2022. It’s not just the 360% number that’s scary, the acceleration is the scariest thing. Our growth rate increased from 256% to 360% in just two years from 2020 to 2022.

From a global perspective, we are in the late stages of a debt disaster and we are accelerating debt issuance to compensate for non-existent economic growth.

Although we are in Singapore, we are all in the US dollar system, and the monetary policies of most countries are a reflection of US financial policies. So I spend a lot of time discussing the Federal Reserve and U.S. financial policy.

Here’s a chart of U.S. debt maturities. In 2026, the United States will have nearly $8 trillion in bonds, and the United States has to find someone willing to accept this debt. If the world is facing a problem of too much debt and not enough people, who is going to buy the debt?

When a government has a lot of debt that needs to be issued, but not enough people are willing to buy the debt, the government will solve the problem by printing money.

So when you look at the issue of fiat currency liquidity from a global perspective and from the perspective of the United States, the issuer of reserve currency, this is the largest market for currency issuance, and no one wants to buy these bonds.

AI driven new technologies are developing and AI requires cryptocurrencies

The next topic will shift from legal currency to technology and explore the topic of AI.

Yesterday I attended a luncheon with global asset managers, family offices, wealth sellers. The issue that everyone is most confident about should be AI. About 75% of people mentioned AI and AI is the future development trend.

Every era has its own topics: in 2000, the Internet ruled the world; in 1929, radio and railways ruled the world. In different cycles, we focus on emerging technologies that will revolutionize people’s lives. The same goes for AI. From the invention of the computer Internet to the present, the popularity of computers has led to the rapid upgrading of human civilization, which can also explain why investors are so concerned about AI.

What changes would thinking computers bring to our civilization? AI may create trillions of dollars in value.

A bright spot over the past six months has been Chat GPT, arguably the fastest-adopted technology in human history. Why start-up companies are talking about adopting large language models (LLM models) in a specific field to improve the productivity of the company’s products.

Currently, the leading stock in the AI field is NVIDIA. Since NVIDIA launched products available for public consumption, NVIDIA’s stock price has increased by approximately 200%, with a price-to-earnings ratio of 100 times. But this is ridiculous, how much profit would NVIDIA need to make in 5-10 years to reach its current valuation. I agree with some people that NVIDIA’s stock price is a bubble, and this bubble will be bigger.

Therefore, on the one hand, underpopulation and large debt-driven fiat liquidity create a bull market, on the other hand, AI will also drive a technology bull market. I think AI is an individual economic unit that doesn’t care about human regulations, so governments can’t kill AI by force. While computers could be wiped out, it would also destroy our social connections, and I don’t think a single government can punish AI. Therefore, a bull market driven by underpopulation and growing fiat liquidity due to large amounts of debt + a tech bull market driven by AI (AI requires encryption, so the crypto space is also a bull market) = double happiness.

What does AI need? AI requires computing power and data storage. When I think about how portfolios and family offices are getting into AI, I’m already missing out on the best opportunities to invest in startups that are currently on the rise. I won’t be able to get liquidity until 2026-2027, because it takes 5-7 years for a company to launch its own mature product, so I need to find some applications that can be implemented immediately.

New technologies driven by AI are developing, and AI requires cryptocurrency. AI food is mainly composed of computing power (from NVIDIA and semiconductors) and data storage. The data storage market will reach US$472 billion in 2030.

Now, I buy NVIDIA stock at 100 times earnings, but I can still think about data storage and possibly cryptocurrency-related issues.

In the future, many venture capital institutions may say they want to invest in AI funds. In the future, many AI promotional materials may have hundreds of billions of dollars in investment. But if you can’t explain what AI is going to solve, essentially, none of these projects will work.

In 2022, AI’s expected data storage demand is US$90.17 billion, which will grow to US$472.47 billion by 2030.

Why does AI need decentralized storage? Centralized data management suffers from the following problems: poor data management; lack of control/transparency over data; predatory and opaque pricing. Fundamentally, AI will create an opportunity for decentralized storage.

Now I need a shitcoin, which needs to meet three aspects: 1. It must be a listed token; 2. It has fallen by more than 90% from the high point in 2021; 3. It must be directly related to AI food, and Filecoin meets these three standard.

AI needs decentralized storage, and Filecoin is a solution.

**Why do I hold Filecoin? **

Filecoin, considered a worthless cryptocurrency, has fallen nearly 99% from its peak of $300 to its current price of $3. But people are still using Filecoin.

In the second quarter of 2023, Filecoin utilization increased to 7.6% of storage capacity.

There are real customers using the Filecoin network, and there is data storage on the network, so there is still a lot of market space. Although there are currently centralized solutions from AWS, if users value the benefits of data decentralization in the future, then the decentralized storage market will have more room for development.

I have briefly stated why Filecoin will rise significantly and I hold Filecoin.