BitMEX Co-Founder Arthur Hayes Says Bitcoin Is The recent 52% crash from its all-time high in October sends a critical warning signal – but crypto could ultimately reach new record highs once the Federal Reserve responds to an AI-driven banking crisis it believes is imminent.
In his latest essay, “This Is Fine,” Hayes argued that bitcoin’s divergence from traditional tech stocks reveals its role as a “fire alarm of global fiat liquidity.” While the Nasdaq has remained relatively stable, bitcoin has plunged from $126,000 to the current $67,000, incorporating what Hayes describes as a massive credit destruction event that stock markets have yet to recognize.
“Bitcoin is the freely traded asset most responsive to the supply of fiat credit,” Hayes wrote. “The recent divergence between Bitcoin and the Nasdaq is sounding the alarm that a massive credit destruction event is near.”
Hayes models a scenario in which artificial intelligence displaces just 20 percent of the 72.1 million knowledge workers in the United States, triggering an estimated $557 billion in consumer defaults and mortgages, about half the severity of the 2008 financial crisis. This AI-driven shock would devastate regional banks and force the Federal Reserve to “conduct the largest money printing in history,” he predicts.
“Deflation is bad, but ultimately good for credit-sensitive fiat assets like Bitcoin,” Hayes said. “First the market assesses the impact… Then… the monetary mandarins panic and push that Brrrr button harder than I shred powder in the morning after a three-foot fall.”
Hayes noted gold’s recent gains, particularly against Bitcoin, as another red flag, stating that “a rising gold relative to a falling Bitcoin clearly tells us that a Pax Americana risk-free credit deflationary event is brewing.”
Hayes said that once the Fed steps in with emergency liquidity measures – similar to the March 2023 response to regional bank failures – bitcoin will “decisively rally off its lows” and the expectation of sustained money printing will drive it to new all-time highs.
That doesn’t mean there won’t be more suffering in the foreseeable future, Hayes said. He warned that bitcoin could fall further before the Fed acts, possibly falling below $60,000 as political dysfunction delays the central bank’s response. Crypto investors, he advised, should stay liquid, avoid leverage and “wait until the Fed makes it clear that it’s time to dump dirty fiat and get into risky assets with free abandon.”
