Arthur Hayes Discusses the Sudden Surge in Bitcoin and the Reasons for Bullish Outlook on Ethereum

Editor| WuBlockchain

In a video interview on the Altcoin Daily podcast, BitMEX co-founder Arthur Hayes stated that U.S. debt pressure, Treasury buybacks, and potential yield curve control will continue to release liquidity, driving Bitcoin higher, while also expressing a bullish outlook on the relatively lagging ETH. Notably, BitMEX, which he co-founded in 2014, has announced it will officially shut down on September 23, 2026, ending 11 years of operation; the operator stated the decision was based on business and industry strategic assessments, following over a year of seeking a sale.

Audio transcription was done by GPT, may contain errors, please watch the original video on YT.

Traditional Finance Faces a Crisis of Confidence in U.S. Debt Amid $40 Trillion in Liabilities

Host: As someone from the traditional financial system, what do you think traditional financial institutions are thinking now? If Crypto becomes a significant market theme by 2026, what exactly are traditional financial players thinking today when they look at the crypto market?

Arthur Hayes: I think everyone in the TradFi circle is now talking about a new term — "sustainability." The U.S. already has about $40 trillion in debt, with rising interest payments, and many other major sovereign bond markets also have problems. People are starting to worry: "Will these bonds I hold still be valuable in five years? Could inflation surge again? Are the assets I hold right now even correct?"

And after the U.S. Treasury started bond buyback operations today, this concern has clearly been amplified. The U.S. Treasury at least doubled the authorized buyback size for long-term Treasuries. These things reinforce a fear in the market: "Oh my, I'm holding so much government debt, but its performance lags far behind almost every other asset. Why should I still hold this stuff?"

Moreover, the U.S. government has proven time and again one thing: when you really need to sell these bonds on a large scale, you might not be able to smoothly sell them, right? If any country wants to sell U.S. Treasuries on a massive scale, problems immediately arise: "Wait, let's handle this through the FIMA Repo Facility first," "Let's find another way," "Are you a sufficiently important ally?" Things like that.

So, for a country, you originally held this asset as part of your national savings — perhaps reserves accumulated from long-term trade surpluses. You didn't choose to hold oil, gold, fertilizer, or other physical assets; you chose to hold U.S. Treasuries. But when you actually need to liquidate these assets for your domestic economy or any other purpose — the specific reason isn't important — the U.S. might tell you: "No, you can't just sell it like that. Let's find another way for you to exit this position — provided you're our friend."

Why Do U.S. Treasury Buybacks Drive Bitcoin Higher?

Host: So, how does Traditional Finance view Crypto? If they're so worried about debt and bonds now, is Crypto even on their radar?

Arthur Hayes: No. I think Crypto is just one of the "pressure relief valves"; it's essentially a pressure valve for the massive money printing by central banks before. So, when the market starts worrying more that the U.S. will implement some form of milder but clearer yield curve control, Bitcoin and other Crypto asset prices become that relief valve. Last night, after this announcement, you already saw this mechanism start to work.

While the scale itself isn't particularly exaggerated this time, maybe just increasing from $20 billion to $40 billion or something, the specific number isn't the point. More important is the signal. The market sees: the U.S. 10-year Treasury yield once rose to about 4.75%, and it seemed it might even hit 5% soon. That obviously scared them, so within weeks, they suddenly launched something like "Operation Twist," and doubled its size.

At the same time, the Federal Reserve — I have a friend working in Washington — they're not going to raise interest rates now, even though according to existing data, they really should. Looking at 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 theoretically should hike, no question.

But they won't. Why? Because the U.S. Treasury still needs to issue massive amounts of short-term T-bills, using these tools for various operations in the market. The fundamental reason is, fewer and fewer people are willing to hold this debt long-term.

Host: So, the Fed should hike, but because the U.S. debt burden is too heavy, it actually can't do that. And just on the day we're recording this episode, the U.S. Treasury just announced it's doubling the bond buyback size. For those who entered the Bitcoin market in the past year or two and are still trying to understand macroeconomics, in simple terms, what do these bond buybacks really 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, it's "numbers go up." This is the path to 2008, and 2008 ultimately gave birth to Bitcoin. So, this is precisely the moment you should hold Bitcoin.

The truly important node is when everyone starts realizing: "This government-issued bond, these U.S. Treasuries, may not be worth what I thought. I can't buy truly scarce things with it, and even this market itself has been heavily manipulated. I need a true store-of-value asset." You need an asset that truly responds positively when more and more dollars chase scarce assets.

That's Bitcoin. This was the logic when Bitcoin was born in 2009, and since then, this logic hasn't changed. Of course, it fluctuates with liquidity cycles. But if you're looking for a crucial moment, a moment when the world realizes "the emperor has no clothes," then now is such a node.

When the market starts truly worrying that the world's largest, most liquid sovereign bond market may be approaching yield curve control, I think Bitcoin's price will rise to hundreds of thousands of dollars very quickly.

Why Did the 2008 Financial Crisis Give Birth to Bitcoin?

Host: During the 2008 global financial crisis, you were in the market. What did you mainly observe then? In the year or two before the crisis broke out, were they also intervening in the market through bond buybacks and such? How similar was the situation to now? Before the real crash, were they doing similar things?

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

That was probably the first very clear signal. Later, they initially thought they believed in the "free market," so they let Lehman Brothers collapse.

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

So they went to Washington, asked the government for help, and eventually got about $700 billion in bailout funds. Of course, ordinary people would ask: "Why?" Why can Goldman Sachs bankers still get bonuses while my house gets foreclosed because I can't repay the loan?

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

Of course, I don't know Satoshi Nakamoto, so no one can be sure what he personally thought. But if you look at the social sentiment then, the content of the Bitcoin whitepaper, and its release timing, I think a direct catalyst for Bitcoin's birth was the U.S. abandoning 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 could happen next in 2026, 2027, and beyond?

Arthur Hayes: I think a very important signal Besant released is the FIMA repo facility. You can understand it this way: Many foreign governments globally hold large amounts of U.S. assets. Now the most noteworthy is Japan, not necessarily because Japan faces the most pressure, but it's the case we're most concerned about now.

Japan holds about $1 trillion in U.S. Treasuries. Now Japan needs its currency to strengthen, needs to bring capital back domestically for remilitarization, to support citizens hit by inflation, and other domestic spending. And Japan has signaled readiness to adjust policies, encouraging the corporate sector, private sector, and government-related institutions to sell overseas assets.

What does this mean? Sell U.S. stocks and U.S. bonds, exchange the dollars for yen, bring the funds back to Japan to build a better Japan. The EU, Germany, and many other regions are actually similar. They need to increase spending, whether for military or various social programs. And much of the assets they hold are concentrated in U.S. financial markets.

So, they all eventually need to sell some U.S. assets. But the U.S. can't afford its biggest past buyers suddenly becoming the biggest sellers, because that would destroy the market. For the past two to three decades, a key reason U.S. financial assets performed so well is that these countries kept continuously buying U.S. assets.

If this capital flow reverses, then both the U.S. Treasury market and stock market face significant downside risks. And the U.S. absolutely cannot allow this to happen. That's why they started proposing another solution: increase the counterparty limit for the FIMA repo facility, even ultimately make it unlimited.

That is, 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 them to you, take your U.S. Treasuries, and keep rolling over this financing. After you get the dollars, you can enter the forex market, sell dollars, buy back your domestic currency.

And now, the U.S. government wants a weaker dollar, and many other countries also want a weaker dollar. Through this method, the dollar can depreciate without directly impacting U.S. financial markets due to large-scale foreign investor selling of U.S. assets. 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 bond buybacks. Of course, they can't do this immediately now, because it requires consensus within the Fed, including New York Fed President John Williams, Fed Governor Christopher Waller, and Vice Chair Philip Jefferson, all need to agree.

But eventually, they will reach some behind-the-scenes agreement to get this going. I even think maybe they'll announce something like this in a few weeks at the Jackson Hole Economic Symposium in Wyoming. But regardless, Besant has actually told us the future direction: have the Fed conduct near-unlimited money creation to absorb U.S. Treasuries and other U.S. assets that foreign governments might sell.

This will expand the Fed's balance sheet. I think this is the real big story. As for these bond buybacks now, I think it more tells us where the U.S. government's pain point is — roughly when the 10-year U.S. Treasury yield hits around 5%. If yields look like they're about to break through this level, they'll keep going down this path until eventually entering explicit yield curve control.

Which Technical Indicators Does Arthur Hayes Focus on for Bitcoin?

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

Arthur Hayes: Honestly, I don't really look at technical analysis much. I pay attention to a person named Milton Berg, who mainly does technical analysis on the stock market. And now Bitcoin largely follows the stock market, especially the U.S. stock market's movements.

So, if the logic of the U.S. stock market starts to collapse, since the assets people hold are actually quite similar, once someone gets a margin call, they'll sell what they can sell, right? What do you sell then? Of course, you sell assets that are liquid and can be sold.

So, I observe when Milton Berg buys and when he sells to judge the overall market environment. But if you ask me if I have a dedicated TA trading system specifically for Bitcoin? No.

Of course, I think $60,000 is a very important level, $100,000 is obviously a key hurdle, and the previous all-time high around $125,000 to $126,000 is also a key level. But between these key price points, I don't dive 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 this indicator. I don't trade based on technical indicators. I lean more towards looking at the overall vibe, macro story, and market sentiment. Because ultimately, each of us must tell ourselves a story in our minds, explaining why we buy and why we sell.

Of course, it's best if the liquidity logic aligns with this market narrative, or the market sentiment that's forming. Moreover, you shouldn't invest only after a market sentiment has become so strong that everyone believes it. What you really want to do is get in when this sentiment just emerges from below the surface, before it becomes consensus.

At the same time, I also want to find an asset that is currently not popular with the market. That's why I really like Ethereum now. I think, in this round of liquidity-driven Crypto rally, Ethereum will outperform any other mainstream crypto asset.

Why Bullish on ETH

Host: In my view, if I have to choose one altcoin now, almost all signals point to Ethereum. It at least has a full cycle opportunity, maybe even ten years or longer of development space. For example, Robinhood is pushing asset tokenization, their chain is also built on the Ethereum ecosystem; Ethereum has the most stablecoins; and from a market narrative perspective, asset tokenization has clearly become a very defined trend.

So the feeling I get now is still: buying Ethereum is almost a "no one gets fired for this" choice.

Arthur Hayes: Yes, I think the Robinhood and Arbitrum narrative is indeed good. Of course, the actual Gas Fee flowing to the Ethereum base layer is minimal, but that's not the point; the point is the narrative. Moreover, Ethereum hasn't yet broken its 2021 all-time high of around $5,000, while almost every other ultra-large-cap Crypto asset has broken its previous all-time high in this past cycle.

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

Precisely because of this "Lindy Effect," Ethereum has survived long enough, so in our portfolio, if making an ETH long trade, I'd feel more comfortable allocating a larger nominal position, without taking the same size position on other Crypto assets.

Host: If someone asks me, why choose Ethereum? Other chains also have many highlights, like Solana being faster, cheaper, etc. But Ethereum has the largest network. According to Metcalfe's law, a larger network gives it higher value.

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

Arthur Hayes: I think, ultimately, the most important question is: Who has the largest developer community? The answer is Ethereum. Those other fancy features, I don't care that much. Tell me, which DeFi primitive was first created on a network other than Ethereum? None.

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

Now the question I ask is: "What have you done for me lately?" What truly new thing has Solana made recently? Not really. Similarly, Ethereum hasn't brought me anything particularly amazing in the past four or five years, and precisely because it has been neglected by the market for so long, I think it's now very likely to become the outperforming asset in the next phase.

Host: Suppose Bitcoin rises to $200,000 within five years, maybe sooner, let's not discuss exactly when. Then what price do you think Ethereum would reach?

Arthur Hayes: I don't even know what the ETH/BTC ratio is specifically now. Maybe $20,000, $25,000 equivalent?

Host: Because if looking at past ratios — I know this is using past performance to judge the future — Ethereum can usually be seen as Bitcoin's high Beta asset. If Bitcoin can rise to a certain level, then according to past patterns, Ethereum usually rises with higher elasticity, that's roughly the logic.

Arthur Hayes: Basically yes. Look at Bitcoin Dominance, Bitcoin's market cap as a percentage of the total Crypto market. It's now risen to about 60%. During the 2020-2021 DeFi Summer, this ratio once dropped to about 25% to 26%.

Do I think it could drop that low again? Probably not. But I think dropping to around 40% is entirely possible. And if Bitcoin Dominance really drops from current levels to around 40%, the main driving force will likely be Ethereum. Because ETH is the largest asset besides Bitcoin. No other asset can appreciate so massively in a short enough time to truly push Bitcoin Dominance down significantly.

Does Bitcoin Need the CLARITY Act to Rise?

Host: That calculation would put Ethereum above $20,000. Arthur, you're someone who relies more on "market feel," and have traded in financial markets for decades. So how important do you think the crypto-focused CLARITY Act really is?

Arthur Hayes: Not that important. Whatever, who cares? If I'm a U.S.-focused Crypto project founder and need to raise funds from U.S. venture capital firms, then I fully understand why you'd like the CLARITY Act.

You certainly want a regulatory framework to build some kind of "moat" for yourself. For example, you can spend more on lawyers, meet regulatory requirements, and then use that to block some competitors or restrict clients from doing certain things. I fully understand this logic.

But this isn't how I like to invest in Crypto. If I wanted to play this game, I might as well just buy stocks. So, if that's your play, fine. But I think the CLARITY Act is actually a very bad thing for the U.S. Crypto industry, real innovation, and developers who truly make useful products and find product-market fit.

Bitcoin has developed from its birth in 2009 until today, never needing the CLARITY Act. What does it really need? What it really needs is Besant increasing Treasury buyback size overnight to save the U.S. Treasury market; or creating liquidity through the Fed to help Japan exchange its U.S. Treasuries for cash.

These things are Bitcoin's real drivers. Bitcoin doesn't need any CLARITY Act to rise. And, how long has the CLARITY Act been discussed in the market? About two years. But what just drove the market to one of its biggest rallies in recent years? It was the market finally realizing the U.S. debt problem is truly problematic, and yield curve control is approaching.

Host: But this would undoubtedly benefit Ethereum, right? Stablecoins would develop more around Ethereum, the GENIUS Act might also help drive it. The U.S. government and market are obviously pushing AI heavily. Their hand is on the button, wanting funds to flow into AI. Similarly, they also want funds to flow into stablecoins, because that increases demand for U.S. Treasuries.

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

Of course, they talk about various acts, this bill, that bill, say a lot of things. But as you just said, they're truly all-in on AI. They'll require banks to cooperate, change regulations to let banks hold more related assets on their balance sheets; they'll even use funds from passed acts to directly buy corporate equity.

This is pure state socialism, not capitalism. What about Crypto? Where's the government bailout for Circle? Where's the government investment in Coinbase? So, of course they say many nice things verbally. But when it comes time to put money down, what Crypto companies have they actually invested in? I haven't seen it. I guess they've said some nice things at least.

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

Arthur Hayes: Veto.

Host: Veto forever?

Arthur Hayes: Not forever, just veto this one.

Host: Anyway, both the SEC and CFTC participated in the White House summit this week and are continuing to advance related work. What do you think? Now the SEC and CFTC are basically acting very supportive of Crypto.

Arthur Hayes: That's good. Good for U.S. companies, I support it. Good. I have no negative comments on that.

Host: If Bitcoin suddenly dropped to $35,000 tomorrow, what would most likely cause it? And what would happen next in the market?

Arthur Hayes: Possibly because Michael Saylor gets liquidated and has to sell all his Bitcoin at once.

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

Arthur Hayes: That's the "capitulation drop" candlestick everyone is waiting for. That's the real time to buy, equivalent to that moment in March 2020. And don't forget, there's still a lot of money in the market. So even if there's some brief price dislocation then, you should buy that drop.

Host: If Bitcoin suddenly rose to $120,000 tomorrow, what would most likely cause it? And what would happen next in the market?

Arthur Hayes: The Fed might remove the counterparty limit for the FIMA repo facility, and then Bitcoin would rise to $500,000 very quickly. And once it breaks the all-time high, the market will start chasing again. This would become a momentum trade.

Host: Those were two extreme scenarios. More realistically, where do you think Bitcoin will be by the end of this year?

Arthur Hayes: $126,000, breaking the previous all-time high.

Host: What would really keep you up at night? You seem like a fearless person and a long-term investor. But if there's one thing, considering your main positions are in Crypto, what are you truly worried about?

Arthur Hayes: War. Because ultimately, if the power grid is cut off, then Crypto is gone. At that point, what do you have? Can e-dollars help you? Can fiat money still be used? Where's your physical gold? Where's your gun? I worry about situations where social order truly collapses.

Of course, it doesn't have to be war. Like a severe cyber attack causing widespread internet outages, or water supply systems being shut down, things like that. If it really gets to that degree, we're entering a "Mad Max" world.

Host: Then do you think such a situation would first impact those more fragile, more easily attacked protocols.

Arthur Hayes: As for those weaker protocols, this is like asking: in that situation, what can still function as money? You have to engage in a "coordination game" with others, collectively deciding what can actually buy other people's time and labor. Of course, we can discuss theories all day, but one thing I'm sure — it definitely wouldn't be SUI.

Host: For those just starting with "Vibe Trading" today, they see Arthur Hayes and think: "I like this person's trajectory, I want to learn trading like him." What advice would you give to people just entering the trading market?

Arthur Hayes: Patience and commitment. The market exists to take your money, not to help you make money. So, you must have patience, truly commit, and read many books.

Host: Is there a specific book you particularly like?

Arthur Hayes:Reminiscences of a Stock Operator, about the story of Jesse Livermore. He was a very famous speculative trader during the American Great Depression.