Arthur Hayes discusses the reasons behind the sudden rise of Bitcoin this round and his optimistic outlook on Ethereum's future

Editor | Wu Says Blockchain

Arthur Hayes, co-founder of BitMEX, stated in a video interview on the Altcoin Daily podcast that the pressure from U.S. debt, treasury buybacks, and potential yield curve control will continue to release liquidity, driving up Bitcoin, while also being optimistic about the relatively lagging ETH. Notably, BitMEX, which he co-founded in 2014, has announced that it will officially shut down on September 23, 2026, ending 11 years of operation; the operator stated that the decision stemmed from a business and industry strategic assessment, and the platform had been seeking a sale for over a year.

The audio transcription was completed by GPT and may contain errors; please watch the original video on YT.

Under $40 Trillion in Debt, Traditional Finance is Experiencing a Crisis of Trust in U.S. Treasuries

Host: As someone who has come out of the traditional financial system, what do you think these traditional financial institutions are thinking right now? If Crypto has already become an important market theme by 2026, what are these traditional financial players really thinking when they look at the entire crypto market today?

Arthur Hayes: I think everyone in the TradFi circle is talking about a new term—"sustainability." The U.S. has about $40 trillion in debt, with rising interest expenses, and many other large sovereign bond markets also have issues. People are starting to worry: "Are these bonds I hold going to be worth anything in five years? Will inflation spike again? Are the assets I currently hold the right ones?"

And today, after the U.S. Treasury initiated bond buyback operations, this concern has clearly been amplified. The U.S. Treasury has at least doubled the authorized buyback scale for long-term treasuries. These events are reinforcing a fear in the market: "Oh my god, I hold so many government bonds, but their performance is far behind almost all other assets; why am I still holding these things?"

Moreover, the U.S. government has repeatedly proven one thing: when you really need to sell these bonds on a large scale, you may not be able to sell them smoothly, right? If any country wants to sell U.S. treasuries on a large scale, various problems will immediately arise: "Wait a minute, let's first deal with this through the FIMA Repo Facility," "We'll think of other ways," "Are you an important enough ally?" and so on.

So, for a country, you originally treated this asset as part of national savings—perhaps accumulated from long-term trade surpluses. You chose to hold U.S. treasuries instead of oil, gold, fertilizers, or other physical assets. But when you really need to liquidate these assets for your domestic economy or any other purpose, the specific reasons don't matter; the U.S. side might tell you: "No, you can't sell them directly like that. We want to find another way for you to exit this position—of course, provided you are our friend."

Why Will Treasury Buybacks Drive Bitcoin Up?

Host: So, how do traditional financial institutions view Crypto? If they are so worried about debt and bond issues right now, does that mean Crypto hasn't even entered their radar?

Arthur Hayes: No. I think Crypto is just one of the "pressure relief valves"; it is essentially one of the pressure relief valves from the previous massive money printing by central banks. So, when the market starts to worry more and more that the U.S. will implement yield curve control in a milder but clearer way, the prices of Bitcoin and other Crypto assets will become that pressure relief valve. After the announcement last night, you could already see this mechanism starting to take effect.

Although the scale itself isn't particularly exaggerated, it might just be an increase from $20 billion to $40 billion; the specific number isn't the focus. What matters more is the signal. What the market sees is that the yield on the U.S. 10-year treasury briefly rose to about 4.75%, and it seemed like it could quickly reach 5%. This clearly scared them, and within weeks, they suddenly launched operations similar to "Operation Twist," even doubling the scale.

At the same time, the Federal Reserve—I have a friend who works over there in Washington—won't raise interest rates now, even though according to existing data, they should. Based on U.S. inflation data, economic growth, and the 2-year treasury yield being about 50 to 60 basis points higher than the effective federal funds rate, the Fed should theoretically raise rates; there's nothing to discuss.

But they won't. Why? Because the U.S. Treasury still needs to issue a large number of short-term treasury bills to perform various operations in the market. The fundamental reason is that fewer and fewer people are willing to hold this debt long-term.

Host: So, the Fed should raise rates, but because the U.S. debt burden is too heavy, they can't actually do so. And just on the day we recorded this episode, the U.S. Treasury just announced it would double the scale of bond buybacks. For those who have just entered the Bitcoin market in the past year or two and are still trying to understand macroeconomics, simply put, what do these bond buybacks mean?

Arthur Hayes: It means more liquidity. It means there will be more fiat currency units chasing a limited number of goods and assets, and Bitcoin is one of them. Simply put, "the digital will rise." This is the road to 2008, and 2008 ultimately gave birth to Bitcoin. So, this is precisely why you should hold Bitcoin now.

The truly important point is when everyone starts to realize: "These government-issued bonds, these U.S. treasuries, may not be worth what I thought they were. I can't buy truly scarce things with them, and even this market itself has been heavily intervened; I need a real value storage asset." What you need is an asset that can truly respond positively as more and more dollars chase scarce assets.

That is Bitcoin. This is the logic behind Bitcoin's birth in 2009, and that logic has not changed since then. Of course, it will fluctuate with liquidity cycles. But if you're looking for a very critical moment, the moment when the whole world starts to realize "the emperor has no clothes," then now is that moment.

When the market begins to genuinely worry that the largest and most liquid sovereign bond market in the world may soon enter yield curve control, I believe the price of Bitcoin will quickly rise to hundreds of thousands of dollars.

Why Did the 2008 Financial Crisis Give Birth to Bitcoin?

Host: You were in the market during the 2008 global financial crisis. What did you mainly observe at that time? Did they also intervene in the market through bond buybacks a year or two before the crisis broke out? How similar were the situations then and now? Were they also doing similar things before the actual collapse?

Arthur Hayes: Of course. After the crisis truly broke out, the first thing they did was deal with Bear Stearns. Strictly speaking, it wasn't a direct bailout of Bear Stearns, but rather allowing Jamie Dimon-led JPMorgan to acquire Bear Stearns at a very low price while providing substantial loan support. This was actually a very favorable deal for JPMorgan.

This was probably the first very obvious signal. Later, they initially thought they believed in the "free market," so they let Lehman Brothers go bankrupt.

Then they realized they actually didn't like the free market that much. Next, you saw the CEOs of major banks hopping on trains to Washington. Do these people usually take trains to Washington? Of course not. But that time, they were going to get public funds.

So they went to Washington, sought government assistance, and ultimately received about $700 billion in bailout funds. At this point, ordinary people would naturally ask: "Why? Why can Goldman Sachs bankers still receive bonuses while my house is taken by the bank because I can't pay the mortgage?"

They also didn't fulfill their obligations, right? Why did Goldman Sachs get bailed out? Why did AIG get bailed out? Why were all these institutions saved while I lost my house? This is the background of Bitcoin's birth.

Of course, I don't know Satoshi Nakamoto, so no one can be sure what he was really thinking. But if you look at the social discourse at that time, the content of the Bitcoin white paper, and its release timing, I believe one direct incentive for Bitcoin's birth was that the U.S. effectively abandoned its responsibility to maintain a sound monetary system during the massive bailouts after the 2008 financial crisis.

Host: So, what other tools do they have to release liquidity? What might happen in 2026, 2027, and beyond?

Arthur Hayes: I think a very important signal released by the Fed is the FIMA repo facility. You can understand it this way: many foreign governments around the world hold a large amount of U.S. assets. Right now, the most noteworthy is Japan, not necessarily because Japan is under the most pressure, but because it is currently the case we are most concerned about.

Japan holds about $1 trillion in U.S. treasuries. Now Japan needs to strengthen its currency, bring capital back home for re-militarization, support citizens affected by inflation, and other domestic expenditures. Moreover, Japan has already signaled that it is ready to adjust policies to encourage the corporate sector, private sector, and government-related institutions to sell overseas assets.

What does this mean? It means selling U.S. stocks and U.S. bonds, converting the dollars received into yen, and then bringing the funds back to Japan to build a better Japan. The EU, Germany, and many other regions are actually in similar situations. They need to increase spending, whether for military or various social projects. And the large amount of assets they currently hold is concentrated in the U.S. financial market.

So, they will ultimately need to sell some U.S. assets. But the U.S. cannot afford for its largest buyers to suddenly become its largest sellers, as that would destroy the market. One important reason why U.S. financial assets have performed so well over the past two to three decades is that these countries have been continuously buying U.S. assets.

If this flow of funds reverses, then the U.S. treasury market and stock market will face significant downside risks. And the U.S. absolutely cannot allow this to happen. This is also why they have started proposing another plan: to increase the counterparty limits for FIMA repo facilities, or even ultimately set no limits.

In other words, if you want to sell U.S. treasuries, the U.S. will tell you: "Don't sell directly in the market yet; come to the Fed." The Fed can directly create dollars, give you the dollars, and take over the U.S. treasuries you hold, then continuously roll over this financing. Once you have the dollars, you can enter the forex market, sell the dollars, buy back your own currency.

And now, the U.S. government wants the dollar to weaken, while many other countries in the world also want the dollar to weaken. Through this method, the dollar can depreciate without directly impacting the U.S. financial market due to large-scale sell-offs of U.S. assets by foreign investors. So, the real "pressure relief valve" is the Fed's balance sheet.

I think this is actually a more important signal than the U.S. Treasury's bond buybacks. Of course, they can't do this immediately because it requires internal consensus within the Fed, including agreement from New York Fed President John Williams, Fed Governor Christopher Waller, and Vice Chair Philip Jefferson.

But ultimately, they will reach some sort of behind-the-scenes agreement to make this happen. I even think that perhaps a few weeks later, they will announce something similar at the Jackson Hole Global Central Bank Annual Meeting in Wyoming. But in any case, the Fed has already indicated the future direction: to allow the Fed to create nearly unlimited amounts of money to absorb U.S. treasuries and other U.S. assets that foreign governments may sell.

This will expand the Fed's balance sheet. I believe this is the real big story. As for the current bond buybacks, I think they are more about telling us where the pain points of the U.S. government are—probably around the 10-year U.S. treasury yield reaching about 5%. If the yield looks like it will quickly break this level, they will continue down this path until they ultimately enter clear yield curve control.

What Technical Indicators Does Arthur Hayes Focus on for Bitcoin?

Host: For traders today, if only looking at Bitcoin, what do you think are the most noteworthy technical analysis (TA) signals right now? When you observe Bitcoin from a technical analysis perspective, what do you usually look at?

Arthur Hayes: To be honest, I don't really look at technical analysis. I pay attention to a person named Milton Berg, who mainly does technical analysis for the stock market. And right now, Bitcoin is largely following the stock market, especially the U.S. stock market's trends.

So, if the logic of the U.S. stock market starts to collapse, since the assets everyone holds are actually highly similar, once someone receives a margin call, they will sell whatever assets they can sell, right? At that point, what will you sell? Of course, you will sell those liquid assets that can be sold.

So, I will observe when Milton Berg buys and when he sells to gauge the overall market environment. But do I have a dedicated technical analysis trading system for Bitcoin? No.

Of course, I think $60,000 is a very important level, and $100,000 is clearly a significant threshold; the previous historical high of around $125,000 to $126,000 is also an important level. But between these key price levels, I won't delve into very detailed technical charts for short-term trading. That's not my style.

Host: For any asset that has achieved product-market fit, is the 200-week moving average one of the most noteworthy technical indicators?

Arthur Hayes: Maybe, I don't know. I can't say that because I never look at that indicator. I don't trade based on technical indicators. I prefer to look at the overall atmosphere, macro stories, and market sentiment. Because ultimately, each of us has to tell ourselves a story in our minds to explain why we buy and why we sell.

Of course, it's best if the liquidity logic aligns with the market narrative or the market sentiment that is forming. And you shouldn't wait until a market sentiment is strong enough that everyone believes it before investing. What you really want to do is enter when that sentiment is just emerging from below the surface and hasn't yet become consensus.

At the same time, I also hope to find an asset that is currently not favored by the market. That's why I really like Ethereum right now. I believe that in this liquidity-driven crypto bull market, Ethereum will outperform any other mainstream crypto asset.

Why I Am Bullish on ETH

Host: To me, if I had to choose another altcoin right now, almost all signals point to Ethereum. It at least still has a complete cycle of opportunity, and it may even have ten years or more of development space. For example, Robinhood is promoting asset tokenization, and their chain is built on the Ethereum ecosystem; Ethereum has the most stablecoins; and from a market narrative perspective, asset tokenization has clearly become a very explicit trend.

So, my feeling now is still: buying Ethereum is almost a choice where "no one will lose their job because of it."

Arthur Hayes: Yes, I think the narrative around Robinhood and Arbitrum is indeed very good. Of course, the actual gas fees flowing to the Ethereum base layer are minimal, but that's not the point; the point is the narrative. Moreover, Ethereum has yet to break the historical high of about $5,000 set in 2021, while almost all other large-cap crypto assets have surpassed their previous historical highs in this recent cycle.

So, Ethereum is currently lagging, and that's exactly why I like it. Additionally, it is unlikely to suddenly go to zero. At least I don't think I'll wake up one morning to see ETH plummet 75% for some reason. Of course, such things could theoretically happen. But Ethereum has been running since 2015. In contrast, some other blockchains may have only existed for one or two years, so the risk of such extreme situations occurring is much greater.

Because of this "Lindy effect," Ethereum has existed long enough, so in our portfolio, if I were to take a long position in ETH, I would feel more comfortable allocating a larger nominal position, rather than taking the same size position in other crypto assets.

Host: If someone asks me why to choose Ethereum, there are many highlights in other chains, such as Solana being faster and cheaper, etc. But Ethereum has the largest network. According to Metcalfe's Law, a larger network gives it a higher value.

So, what is more important? The network itself, or the usability advantages like speed and low fees? After all, Silicon Valley is always chasing "the next big thing."

Arthur Hayes: I think ultimately, the most important question is: who has the largest developer community? The answer is Ethereum. I don't really care about all those flashy features. Can you tell me which DeFi primitive was first created on a network other than Ethereum? Not one.

So, where is the real creativity concentrated? It is in Ethereum. Where is the real developer talent concentrated? Also in Ethereum. Of course, others will take these ideas and make them prettier and sexier on Solana or other platforms, and indeed some people made a lot of money from that. But that was last year or two years ago.

Now I want to ask: "What have you done for me lately?" What has Solana produced that is truly new recently? Actually, nothing. Similarly, Ethereum hasn't brought me anything particularly stunning in the past four or five years, and precisely because it has been neglected by the market for so long, I believe it is now very likely to become an asset that outperforms the market in the next phase.

Host: Assuming Bitcoin rises to $200,000 within the next five years, possibly even sooner, let's not discuss when exactly. What do you think Ethereum will be priced at by then?

Arthur Hayes: I don't even know what the current ETH/BTC ratio is. Maybe corresponding to $20,000 or $25,000?

Host: Because if we look at past ratios— I know this is judging the future based on historical performance—Ethereum is usually seen as a high Beta asset to Bitcoin. If Bitcoin can rise to a certain level, then based on past patterns, Ethereum typically rises with even greater elasticity; that's the logic.

Arthur Hayes: Basically, that's right. Look at Bitcoin Dominance, which is the ratio of Bitcoin's market cap to the entire crypto market. It is now around 60%. During the DeFi Summer from 2020 to 2021, this ratio dropped to about 25% to 26%.

Do I think it will drop that low again? Probably not. But I think dropping to around 40% is entirely possible. And if Bitcoin Dominance does drop from its current level to around 40%, the main driving force will likely be Ethereum. Because ETH is the largest asset besides Bitcoin. No other asset can achieve such a massive appreciation in a short time, thereby significantly reducing Bitcoin Dominance.

Does Bitcoin Need the CLARITY Act to Rise?

Host: So, by that calculation, Ethereum would rise above $20,000. Arthur, you are someone who pays more attention to "market sentiment," and you have been trading in financial markets for decades. How important do you think the CLARITY Act aimed at Crypto is?

Arthur Hayes: Not that important. Who cares? I am a founder of a Crypto project focused on the U.S. market and need to raise funds from U.S. venture capital firms, so I completely understand why you would like the CLARITY Act.

You certainly want a regulatory framework that can create some sort of "moat" for yourself. For example, you can spend more money hiring lawyers to meet regulatory requirements, thereby blocking some competitors or restricting customers from doing certain things. I completely understand that logic.

But that's not the investment approach I like in Crypto. If I want to play that game, I might as well just buy stocks. So, if that's your way of playing, that's fine. But I think the CLARITY Act is actually a very bad thing for the U.S. Crypto industry, true innovation, and those developers who are genuinely creating useful products and finding product-market fit.

Bitcoin has developed from its birth in 2009 to today without ever needing the CLARITY Act. What does it really need? It needs the Fed to raise the treasury buyback scale overnight to save the U.S. treasury market; or to create liquidity through the Fed to help Japan convert its U.S. treasuries into cash.

These are the real driving forces behind Bitcoin. Bitcoin doesn't need any CLARITY Act to rise. And how long has the market been discussing the CLARITY Act? Almost two years. But what truly drove the market to experience the largest surge in recent years? It was because the market finally realized that the U.S. debt problem is genuinely problematic, and yield curve control is approaching.

Host: But this will undoubtedly be beneficial for Ethereum, right? Stablecoins will develop more around Ethereum, and the GENIUS Act may also play a role in promoting it. The U.S. government and the market are clearly pushing AI hard. Their hands are on the button, hoping for funds to flow into AI. Similarly, they also want funds to flow into stablecoins, as this will increase demand for U.S. treasuries.

Arthur Hayes: But you can think of it from another angle. Has the U.S. Department of Defense or the U.S. Treasury bought equity in Circle? No. But now they will buy equity in rare earth mining companies, buy Intel, IBM, and various other companies. So where is the government bailout for Crypto companies? I haven't seen it.

Of course, they will discuss various bills, this bill, that bill, and say a lot of things. But as you just said, they are truly all-in on AI. They will require banks to cooperate, modify regulatory rules to allow banks to hold more related assets on their balance sheets; they may even use funds from already passed bills to directly buy corporate equity.

This is completely state socialism, not capitalism. And what about Crypto? Where is the government bailout for Circle? Where is the government investment in Coinbase? So, they will certainly say a lot of nice things. But when it comes to putting money on the line, what Crypto companies have they actually invested in? I haven't seen it. I think they at least said some nice words.

Host: If Donald Trump is watching this episode right now, what would you like to say to him about the CLARITY Act?

Arthur Hayes: Veto.

Host: Forever veto?

Arthur Hayes: Not forever, just veto it this time.

Host: In any case, the SEC and CFTC participated in the White House summit this week and are continuing to advance related work. What do you think? The SEC and CFTC are basically behaving very supportively toward Crypto.

Arthur Hayes: That's good. It's a good thing for American companies, and I support it. Great. I have no negative comments on that.

Host: If Bitcoin suddenly drops to $35,000 tomorrow, what is the most likely reason? What will happen next in the market?

Arthur Hayes: It might be because Michael Saylor got liquidated and had to sell all his Bitcoin at once.

Host: If that's the reason, would it lead us into a prolonged bear market lasting two years or even eight years? Or would it bring us closer to the bottom? Perhaps that would be a complete capitulation sell-off, bringing the market closer to a true bottom.

Arthur Hayes: That is the "capitulation drop" K-line that everyone is waiting for. That would be the real time to buy, equivalent to that moment in March 2020. And don't forget, there is still a lot of money in the market. So even if there are some temporary price dislocations at that time, you should buy that drop.

Host: If Bitcoin suddenly rises to $120,000 tomorrow, what is the most likely reason? Then what will the market do next?

Arthur Hayes: The Fed might lift the counterparty limit for the FIMA repo facility, and then Bitcoin would quickly rise to $500,000. And once it breaks the historical high, the market will start chasing it again. This will turn into a momentum trade.

Host: The previous two scenarios were extreme cases. Realistically, where do you think Bitcoin will be by the end of this year?

Arthur Hayes: $126,000, breaking the previous historical high.

Host: What would really keep you up at night? You seem like someone who is not very fearful and is also a long-term investor. But if you had to name one thing, considering your main positions are in Crypto, what truly worries you?

Arthur Hayes: War. Because ultimately, if the power grid is cut off, then Crypto is gone too. At that point, what do you have left? Can electronic dollars help you? Can fiat currency still be used? Where is your physical gold? Where is your gun? What I worry about is the real collapse of social order.

Of course, it doesn't necessarily have to be war. For example, a serious cyberattack that leads to widespread internet disruption, or the water supply system being shut down. If it really reaches that level, we enter a "Mad Max" style world.

Host: Do you think such situations would first impact those more fragile and vulnerable protocols?

Arthur Hayes: As for those weaker protocols, it's actually like asking: in such a situation, what can still serve as currency? You have to engage in a "coordinated game" with others, collectively deciding what can allow you to purchase others' time and labor. We can certainly discuss various theories all day, but one thing I am very sure of— it definitely won't be SUI.

Host: For those who are just starting to get into "vibe trading" today, they see Arthur Hayes and think: "I like this person's growth trajectory; I want to learn trading like him." What advice would you give to these newcomers to the trading market?

Arthur Hayes: Patience and commitment. The purpose of the market is to take your money, not to help you make money. So, you must have patience, and you must truly commit, and read a lot of books.

Host: Is there a particular book you especially like?

Arthur Hayes: "Reminiscences of a Stock Operator," which tells the story of Jesse Livermore. He was a very famous speculative trader during the Great Depression in the U.S.