Compilation | Wu Blockchain about Blockchain
Original link:
https://www.youtube.com/watch?v=7GpQPiF-RBg
In this podcast, Kyle Chasse and Arthur Hayes deeply analyze the logic that Bitcoin may exceed $1 million by 2028. Arthur believes that the world is currently entering a stage of disintegration of the dollar-dominated order, and the continued expansion of the US fiscal deficit and debt structure will drive long-term inflation and asset repricing. In this process, Bitcoin will transform from a "Nasdaq high-Beta asset" to a "hedge tool for the decline of American exceptionalism." He pointed out that the Federal Reserve and the Treasury Department have supported the market through operations such as Treasury bond repurchases, which has formed a new round of promotion for risky assets. In addition, Arthur also talked about the game between China and the United States, the speed of policy response, trading strategies, the rotation of Altcoin, and how institutional funds can indirectly increase their positions in Bitcoin through listed companies. The overall view combines global macro, political game, market structure and narrative evolution.
The Sino-US trade war is essentially a long-term trend, and the increase in volatility supports the price of Bitcoin to break through one million
Kyle: Arthur, three weeks into the recent tariff moves, have the markets priced in these changes?
Arthur: I think people are still under the illusion that "Oh, it won't be that bad." They don't really take the restructuring of the global currency, trade, and capital structure seriously. They don't believe that China and the United States will really decouple. But I think this trend of a dual world is bound to come. Countries will try to play both sides or choose camps. We don't know how this game will eventually evolve.
Trump just accelerated a trend that was already there. He started the trade war in 2018, and Biden continued and intensified it. He backed off a little bit, but if you know Trump's negotiating style, he always starts with the maximum demand, then makes a little concession, shows some conciliatory gesture, and then presses again to get the best deal. So I think this pattern will continue to happen, and the market will be more volatile because of it. But the core of what we understand is that a MOVE of 140 will trigger an immediate policy response. So there is no need to worry about Syria or anything else.
When MOVE reaches 140, volatility is high enough to cause a direct policy response. For example, one day when MOVE reaches 172, the US Treasury Secretary goes on CNBC to complain about tariffs and says that the bond market is in trouble, and Trump immediately announces a 90-day suspension of tariffs. You hear them talking about Treasury buybacks, and Susan Collins of the Fed says they are "ready to do whatever is necessary." The market has shown that the United States cannot withstand volatility, and the same is true for other countries. Bitcoin can thrive in this environment, so there is no need to worry.
Arthur: I don’t think the United States can afford the pain that would be required to make this deglobalization transition. It will happen, but it won’t happen in six months, as Trump wants. It may take twenty years.
Kyle: This is really interesting. Trump won the popular vote and the majority of votes when he came to power. My intuition suggests that right-wing candidates should have won in the upcoming elections in Canada and Europe. But we just saw an election where the left-wing party won. Many people say this is related to Trump's policy style, such as economic turmoil and uncertainty. Do you think this is the main reason? If the situation does not improve before the midterm elections, how do you think Trump and his administration will feel?
Arthur: I think Canada's current victory is more out of a backlash against the "51st state". It's like the United States is saying, "Hey, Canada, you listen to us." This is a gesture of "unity". And there is a similar situation in Europe. The European elites actually do not agree with Trump's approach of wanting to compromise by ending the Russian-Ukrainian war.
So they are united under the slogan "We are Europe", emphasizing that we act in the interests of Europe, emphasizing sovereignty and autonomy. As for Trump, they see him as a "rude American". Therefore, I don't think this is an opposition to the specific content of his policies, but more of an instinctive aversion caused by the way and attitude he shows when implementing his policies.
Review of the speech: Macroeconomic policies drive asset repricing, the logic behind Bitcoin's 6-fold growth
Kyle: You just finished your talk at TOKEN2049. I didn’t catch it live, but hopefully we can find some replays later. Can you summarize the main points of your talk for the audience?
Arthur: In the third quarter of 2022, everyone was very pessimistic about cryptocurrencies and other risky assets. Why? Because interest rates kept rising, the bond market collapsed, the stock market fell, and FTX had problems. No one wanted to touch cryptocurrencies. Bitcoin fell to $15,000, and everyone thought it would fall to $10,000. That was the atmosphere.
Then, all of a sudden, Yellen launched the so-called "non-quantitative easing" policy, which is an aggressive Treasury bond issuance strategy - issuing a large number of Treasury bills and long-term bonds, and injecting the $2.5 trillion that was "sterilized" on the Fed's balance sheet back into the global market. From December 2022 to early 2025, risk assets as a whole soared, Bitcoin doubled sixfold, stocks doubled, gold doubled, and everything performed well. During this period, the Fed did not actually loosen significantly, and it was the Treasury's operations that really drove the market.
Today’s environment is different, but the problems we see are still there. New tariffs, continued bond market collapse, stock market crash, concerns about inflation rising as China stops exporting cheap goods, and uncertainty. A lot of people will say, “I don’t need to own Bitcoin or any of these assets.”
But the point is, when volatility rises, the policy department responds quickly. Treasury Secretary Bessant goes on TV and starts talking about Treasury repo, which is actually a way to relieve the pressure on bank balance sheets, so that banks can lend more money to hedge funds to buy Treasury bonds at auctions, so-called "basis trades." That's what I think is the bottom signal of this cycle - when the Treasury Secretary goes on Bloomberg and says he will do repo and support the Treasury market, it's a "long everything" moment.
These hedge funds have bonds. They structure their transactions: buy bonds and sell bond futures contracts at the same time. Then they take the bonds to the bank and say, "I don't have the money to buy this bond, can you lend me some money?" The bank sees that this is a U.S. Treasury bond, which is a very liquid collateral, and will lend them money and require them to pay a certain percentage of margin.
But for this arbitrage trade to be profitable, hedge funds need to use a lot of leverage. The lower the leverage requirements of banks, the higher the leverage of hedge funds, and the more active they will be in such transactions. At the Treasury auction, they don't even care about the price of the bond, but only the spread between the bond and the derivative.
Even though the US debt has reached $36 trillion, this kind of trade still exists. As long as they can earn a 10 basis point difference and leverage 100 times, they are happy.
Kyle: Is this similar to the basis trading when ETFs were first introduced?
Arthur: Not exactly the same. This is a trading model in the bond market and has little to do with cryptocurrency.
Kyle：So you don’t think they’re going to buy a Bitcoin ETF in a similar way?
Arthur: No, it's all about the liquidity of the dollar. Hedge funds buy the newly issued Treasury bonds. The problem is that as the bonds mature, their liquidity will decrease and they are no longer the benchmark maturity bonds. At this time, the Treasury can do a "budget neutral, supply neutral" operation - that is, issue new bonds and buy back old bonds. In this way, the price of old bonds will rise, and its spread with futures will narrow, and hedge funds will profit. They also get rid of the high capital requirements required by the old bonds, gain more leverage, and then continue to carry out arbitrage transactions.
I also mentioned in my speech that although everyone is talking about Dogecoin and Musk's budget cuts, based on current data, the U.S. Treasury's spending growth in fiscal year 2025 is 22% higher than that in fiscal year 2024. Although we are only in the first two months of the Trump administration, the trend is already obvious.
Kyle: What is the expenditure growth you are talking about? Can you explain it in detail?
Arthur: It is the size of the fiscal deficit that is growing. The US fiscal year starts in October.
Kyle: So you're saying the deficit is bigger this year?
Arthur: That's right. Even with budget cuts, a stock market downturn will lead to reduced tax revenue. This structural reality makes it difficult for the government to quickly reduce fiscal spending. Even if the budget is cut, it may trigger an economic recession, triggering automatic stabilizers such as unemployment benefits, which will lead to further expansion of government spending. So the expansion of the fiscal deficit is almost one-way.
The Treasury needs to find someone to buy these bonds. One way is to provide more leverage support through relative value hedge funds and cooperate with the bond repurchase mechanism. Although this mechanism itself does not directly bring new liquidity, it indirectly creates more dollars by increasing borrowing and leverage.
Kyle: We haven't officially entered quantitative easing yet, right? It's just that the pace of quantitative tightening is slowing down. Are there other similar "non-quantitative easing" tools that can help the market?
Arthur: Yes, for example, the Supplementary Leverage Ratio (SLR). According to new regulations after the global financial crisis, banks need to allocate corresponding capital when holding US Treasury bonds. This regulation is intended to be responsible risk control, but it also limits banks' ability to buy bonds.
During the pandemic, after the bond market was halted, the Federal Reserve temporarily exempted the SLR, allowing banks to purchase government bonds with unlimited leverage. This allowed banks to absorb 1%-2% interest from depositors at low cost, and then use unlimited leverage to buy government bonds with a 4% return, earning the spread and making extremely high profits. Later, this exemption was canceled, but now people like Jamie Dimon (CEO of JPMorgan Chase) and Treasury Secretary Bessant are calling for a re-exemption.
If the SLR is exempted again, US commercial banks will be able to purchase Treasury bonds without restrictions, which is actually another disguised form of "non-QE". Although it is a change at the regulatory level, its impact on the financial system is no different from real quantitative easing.
Finance is the protagonist: Trump's policy stress test and Bitcoin's path to a million dollars
Kyle: What do you think about the Fed and the drama we've seen between Trump and Powell, who started out by saying Powell was too slow and a fool, then backtracked as you said, and even talked about firing him. Now of course the goal is to cut rates. Do you think we're going to see a rate cut in May or June?
Arthur: I don't know. But I think it doesn't really matter. The key is not the Fed, but the Treasury. Ultimately, what Trump is doing is testing the bottom line of the market. He said he was going to fire Powell, and bond yields soared, so he said, "Okay, then I won't fire Powell," and he knew that this was the tolerance limit of the market. He said he would impose the highest tariffs, and the stock market plummeted 20%, and the volatility of the bond market soared, that's another limit. So he is constantly testing how fast the market can withstand changes, and then adjust his strategy accordingly and move forward.
Kyle: This is very interesting. I can’t remember any recent president who really took a businessman’s mentality to “test pressure points” like he did and operated politics like a business.
Arthur: There is really no precedent. But what he did is not more extreme than what the Democrats would do - the policy direction is the same, the difference is just the tone and the speed of execution. This is also why Bitcoin is particularly valuable. Because we don't care who is in power, we know that they will all print more money. And Bitcoin is the asset that performs best when money is printed. I can't tell you which stocks will go up, but I know Bitcoin will go up.
Kyle: In your speech you mentioned that Bitcoin will reach $1 million by 2028, right? So what is the path to achieve this goal?
Arthur: During Biden's term, the U.S. Treasury issued about $7.1 trillion in net debt. Bitcoin also soared, right? And from the current perspective, the fiscal deficit in the first few months of Trump's presidency is already 22% higher than that of Biden's.
Kyle: Is this government spending or something else?
Arthur: It's the fiscal deficit. More specifically, it's the cumulative net fiscal deficit. Current data shows that the Trump administration's fiscal deficit continues to expand. Although they claim to cut spending, it's just a drop in the bucket and it's not enough. Coupled with the structural aging of the U.S. population, social security and medical expenses will continue to increase, which is inevitable. The defense budget will only continue to rise, for example, you need to reconfigure production capacity to manufacture missiles, ammunition, and so on.
So the fiscal deficit will only go in one direction - getting higher and higher. Even if Trump really reduces the deficit ratio to 3% in 2028, due to the large debt base, the interest expenditure alone is also growing exponentially.
So unless you decide to "shut down the government," it's impossible to spend less than Biden. And that's obviously not what Trump promised. We already know what will happen, and we know how Bitcoin will respond. Now with ETFs, the narrative of institutional investors has changed - Bitcoin is no longer just a "high beta asset for the Nasdaq," but a "hedge against the decline of American exceptionalism." They may think, maybe I should hold some Bitcoin because I can't predict what will happen next in the Sino-US situation, Trump's policies, etc.
Kyle: Hearing you say that, it reminds me of a point someone else made - the government will continue to spend more in the future, and a perfect reason is to "make America great again", which means moving all manufacturing back to the country, building nuclear-powered ships that we haven't built in recent years, all of which will cost a lot of money. So they may propose a "trillion-dollar economic stimulus package" to rebuild the United States, subsidize manufacturing, and encourage reshoring. Do you think this is another way of saying "we need a massive fiscal stimulus"?
Arthur: Yes, it will be packaged like Biden's "chip bill" or "Green New Deal". At the end of the day, politicians need to go back to their constituencies with results. They need to say, "Hey, I got you something good." It may be a new factory, some jobs, or a new chip manufacturing center. If Trump said, "I know you don't like deficits, but I got you a bill, and you can go back and build an aircraft manufacturing plant, a wafer fab." Do you think the congressmen will refuse? No. If they want to be re-elected, they must boost the economy of their constituencies.
When banks see these government-guaranteed projects, they will be more willing to lend. "Is there a government project to back it up? Then I am willing to lend." Credit expands, the economy turns, everyone has a job, has an income, and is willing to consume. Yes, there will be inflation, but if everyone has a job and a good income, will they really care? This is what I think the script for future medium- and long-term fiscal expansion will be: the government spends money, the people support it, and the economy turns around.
Liquidity frenzy could push Bitcoin to $250,000 in 2026
Kyle: Do you think the top of this bull market will be in 2025? If so, what price do you think Bitcoin will reach in this cycle?
Arthur: I still think the target is $250,000 for Bitcoin in 2025. I think the real liquidity climax — the stage where money creation reaches its peak — will occur between 2026 and 2027. Because in the United States, the term of the Fed chairman will end in May 2026, and if Trump is re-elected, they may not be able to fully control the political institutions, but they will definitely let someone who supports "printing money" and promotes the "Make America Great Again" agenda take over. By then, we may have an extremely dovish Fed.
So starting from May 2026 at the latest, we will see an extremely loose cycle, which may be extremely crazy from 2026 to 2027. All tools may be used at the same time: QE, leverage easing, Treasury bond repurchases, yield curve control, etc. Everyone will stand on Trump's side, the market will start to over-price future easing, and then we will experience a wave of correction.
Kyle: That is exactly the moment when we should “live and participate in the market”.
Arthur: Yeah, absolutely.
Kyle: Assuming that things do go as you said, which is the "crazy phase" you mentioned earlier, which will happen before 2028, do you think it is possible to achieve the million dollar goal earlier? Or do you think it will happen then?
Arthur: The market may peak in 2026-2027. Then we will realize that market expectations are too high and returns may be lower than expected. Maybe the Republican Party will encounter election problems at that time and the policy direction will have to be adjusted. In addition, we cannot predict what will happen in China. There are too many variables. But I think the world as a whole has embarked on the track of printing money. Once this narrative is deeply rooted, the market will over-extend its expectations for the future and eventually return to reality.
Kyle: What is your current allocation ratio in liquid crypto assets? Between Bitcoin and mainstream currencies?
Arthur: About 60% is Bitcoin, 20% is Ethereum, and the rest is other tokens.
Kyle: Everyone is talking about Ethereum right now. To me, it’s the only chain you can safely deploy $500 billion in DeFi positions without worrying about major problems. Solana doesn’t seem to have stood the test of time. What do you think of Ethereum’s current status?
Arthur: I think Solana is the most undervalued Layer 1 network in the market. From a fundamental point of view, it is very safe, it is a PoS network, it has a large number of developers, and the amount of locked funds is also high. These are real advantages. We focus on the rate of change and market expectations. Solana rose from $7 to $300 because of the surge in meme coins and on-chain transactions, and the speed of adoption was extremely fast. But even if it rose to $300, its market value still did not exceed Ethereum. We are doing price trading, not total market value trading.
So of course Solana’s price will go up. If there is a big monetary easing and investors switch from Bitcoin to Altcoin, we may see Ethereum outperforming Solana, but it may also be the other way around, especially when the price starts to rise and the narrative changes. People will say, “Ethereum is great again, it has the most developers,” and the price will go up.
Kyle: So everyone will say, "We want to build real DeFi, let's go to Solana." Meme coins are popular, and Solana is popular. So what other projects do you think deserve special attention?
Arthur: We invested in Pendle and are also an investor and advisor to EtherFi. I think the next stage of the narrative is the "fundamentals season": Do you have real users? Are they paying for the service? Are these revenues and profits fed back to token holders through the protocol? There are indeed some projects that meet all of these conditions.
I have been speculating in Altcoin for ten years and have seen too many worthless coins. Now it is finally time for me to see "money in my pocket". I am tired of those VC games and garbage ICOs. I want to see projects that have real users, are already online, and start to make profits. If it is a new narrative that has not yet been launched, you can speculate it for fun. But if it is a project that has already been launched, I will not buy the new coin with high FDV, low circulation, and the price will only fall.
We are very optimistic about Pendle, the largest on-chain fixed income platform, which is already profitable and returns profits to PENDLE holders. We are also very optimistic about EtherFi, who are building a crypto "new bank".
I recommended EtherFi's crypto card on Twitter. I've seen a lot of similar products, but this one has reasonable fees, useful features, and can be linked to Apple Pay. I think they will accumulate a very sticky user base. This card is like the "American Express of crypto."
They also promised to use the revenue to buy back tokens and return the repurchased tokens to ETH stakers. So if it is a project that has been launched and can do this, we will be very interested.
Kyle: So for the audience who are watching this video, whether they are new to the circle or experienced veterans, do you have any advice, especially in terms of asset allocation, rebalancing or entry strategy?
Arthur: You have to define your "income threshold" first - who are you comparing yourself to? At Maelstrom, our benchmark is Bitcoin. I can buy Bitcoin directly without paying you. So you have to tell me, why is your performance worth hiring you?
We invest in Altcoin, early-stage projects, and serve as advisors in order to outperform Bitcoin. In other words, this is our "hurdle rate of return."
Of course, for another person, the threshold may be 5% annualized, because he borrows money to invest. Then he must ensure that the annualized return exceeds the borrowing cost.
Or he may be a long-term investor who believes in the Bitcoin and currency devaluation narrative and wants to buy Bitcoin and hold it for ten years to outperform fiat currency. It all depends on your personal situation and goals.
So you must define your goals before investing, and then you can check whether your investment has really achieved your goals. If not, then you need to adjust your strategy. Don't make excuses for a bad investment afterwards, "I bought it for that goal." It will be too late.
Bull market rotation logic: Bitcoin breaking the peak triggers the start signal of the Altcoin season
Kyle: I think you and I are the same. Sometimes we play in this casino and buy some high-risk coins. It is really exciting. When the price soars 50 times, it is like a shot of dopamine. But what do you think is the appropriate proportion of high-risk and high-return Beta investment in their asset allocation for those who are watching, if they also want to play in the casino?
Arthur: If you can’t sleep at night because of price fluctuations, it means your position is too large.
Kyle: I totally agree. I've experienced this, especially when using Aave or Avalanche leveraged lending, borrowing and then investing. Then Bitcoin drops a little bit, and you get so anxious that you can't sleep. That state is really bad.
Assuming Bitcoin returns to its all-time high, what signs can define that the "Altcoin season" has really arrived? — — But before we move on to the next topic, I have to interject. I have recently been using a Bitcoin automatic accumulation trading strategy, and it has worked very well. In just 45 days, I have turned 1 Bitcoin into 1.033. If the trend continues, I expect to rise from 1 Bitcoin to 1.27 or 1.28.
For example, if you start with 0.1 bitcoin and stick to this strategy without interruption or withdrawal, you will have 1.16 bitcoins in ten years. If Bitcoin rises to $1 million by then, then this initial investment of only $9,500 will become an asset worth more than a million.
If you haven't watched the interview I did with Ash from Sequence, the link to the video is in the description below. I'll also put a jump tag at the end so you can click over to it. This is probably one of the most powerful and robust wealth building strategies. All right, back to the interview.
Arthur: I personally think that Bitcoin Dominance will return to the level before 2021, which is about 40% to 70%. Once Bitcoin returns to its historical high, people will start to rotate operations. "The bull market is back? Then Altcoin should outperform Bitcoin, right?" Although this "should" is just a theory, market sentiment is ignited in this way.
So everyone starts to return to the ecosystem. "The bull market is established. We went from 70 to 110, then fell back to 70, and now we have broken through 110 again, maybe even to 150 or 200." If the rising trading volume appears and the technical chart is beautiful, then a typical capital rotation behavior will occur. The market will enter the stage of "mining shit coin and looking for 100x coins", and risk appetite will fully recover.
Strategic reserve fantasy shattered: The United States cannot "print money directly to buy Bitcoin"
Kyle: Do you think there is a possibility, for example, I sometimes imagine such a scenario: a country's "strategic reserve" begins to buy Bitcoin on a large scale, and then other countries see that this is true and follow suit, and the market has a serious supply shock, and Bitcoin begins to soar by $10,000 or $20,000 a day, quickly sucking away the liquidity in the market. Just like the phenomenon we occasionally see - Trump coin (TRUMP) suddenly becomes popular, and the entire market's Altcoin fall 80%, and all funds are sucked in. Do you think it is possible that there will really be a wave of adoption cycles in which the Bitcoin dominance rate soars, so that everyone abandons Altcoin and only Bitcoin is left? Of course, I think that in the end, the funds will still rotate back to Altcoin, but do you think there will be a stage in the middle where Bitcoin is extremely dominant?
Arthur: We have actually been through this a bit. But I personally don’t believe in the idea of “strategic reserves buying Bitcoin”, especially the country that everyone likes to mention the most — the United States. The United States is a deficit country, and the only way to hold Bitcoin with “strategic reserves” is to not sell the part that they have seized from law enforcement agencies — such as the 20,000 Bitcoins.
But I can’t imagine an elected politician publicly saying, “We’re going to print money to buy Bitcoin.” That’s too hard for voters to accept — not to mention that Bitcoin is often portrayed as a “geek club” and a “coin meme” in public opinion. Do you really want the public to think you’re standing up for these people? I don’t think that’s possible.
What is more likely to happen is the "Made in China model": if you have excess power production capacity, then you can mine, and the mined Bitcoins are stored in the treasury, but not bought on the market. Or like the UAE, you can convert surplus hydrocarbon energy into electricity, mine Bitcoins and store them. But you won't directly use the fiscal deficit to buy Bitcoin. You are more likely to directly "print money and issue cash checks" because that can be exchanged for votes. In short, the fantasy of "strategic reserves buying Bitcoins" will never happen.
Kyle: I agree. We actually talked about something similar last time. Now more and more companies are imitating MicroStrategy's way of buying Bitcoin. Although there will be no national strategic reserve plan, we do see that companies buy more Bitcoin than ETFs. Do you think this trend will continue? In addition, Howard Lutnick's son has also started a fund similar to 21.co. Will these factors add up to cause a real supply shock?
Arthur: We participated in the UPXI deal, and they will also include some Bitcoin on their balance sheet. At the end of the day, there is indeed a group of investors in the market who cannot invest in Bitcoin ETFs but want to have exposure to crypto assets. Their institutional regulations do not allow them to directly hold cryptocurrencies, but they can invest in US stocks. So Michael Saylor seized this opportunity.
He said to these people, "You can't buy Bitcoin? No problem, I'll buy it. My company's balance sheet is full of Bitcoin. If you buy my stock, it's equivalent to indirectly owning crypto assets." So their stock prices were pushed up, and the trading premium was far higher than the net assets. This is the model they play, and as long as there is demand, they can continue to do this.
Essentially, these investors are clear in their minds: "I want crypto assets, but I can't buy them directly. So I'll buy the stocks of these companies that are already compliant and allowed to hold them." So these companies use "quasi-treasury strategies" to support their stock prices. I think this approach will continue for some time.
Especially since Michael Saylor's "MicroStrategy" is now one of the constituent companies of the S&P 500, it is able to continuously take money from the market to "add positions". Of course, this pace may stop after the volatility of Bitcoin decreases. By then, these stocks will no longer fluctuate sharply, and the market enthusiasm may naturally subside.
Kyle: Recently, we have also seen that Bitcoin is getting closer and closer to gold and is beginning to decouple from the stock market. In the past, Bitcoin and the stock market were strongly correlated. Do you think this decoupling is really happening or is it just a short-term phenomenon?
Arthur: I think we have seen a certain degree of decoupling. But I still think there will be a big sell-off - when Trump once again declares that he will increase tariffs on China to show his tough stance, the market will react violently. Bitcoin may also experience some volatility.
But now everyone is finally beginning to understand that the real key indicator is "bond market volatility". Whenever bond market volatility soars, it is the time to release money, and this is exactly the environment in which Bitcoin performs best. So I think it will take another actual market verification for the public to fully understand this logic.
You asked me if Bitcoin and the Nasdaq will be highly correlated again like in early April? I don't think so. Bitcoin should be more stable this time - not necessarily rising sharply, but also not crashing like the stock market.
Kyle: Indeed, this kind of trend has almost never appeared in the history of Bitcoin. It has always been traded as a "tech stock", and now it has finally gotten rid of this label.
Arthur: That's a good thing, it's really great.
