Arthur Hayes, the founder of BitMEX and current Chief Investment Officer at Maelstrom, said during a keynote at Korea Blockchain Week that the Federal Reserve’s moves to raise interest rates to combat inflation have had unintended consequences on the broader economy. It’s different than what’s happened before. The standard playbook is starting to break down, Hayes said.
Rising financial asset prices can boost capital gains taxes and government revenue, but when the Fed raises interest rates, these prices can stagnate, reducing tax revenue, Hayes opined. All the while, this, coupled with the political hostility of austerity, increases deficits, leading the U.S. Treasury to issue more bonds. The resulting interest payments to the wealthy stimulate spending and nominal GDP growth, creating a paradox where the Fed’s rate hikes inadvertently fuel economic growth, Hayes said.
In a follow-up interview with journalists, Hayes argued that AI companies, due to their significant cash reserves and robust revenue streams, are less reliant on banks for loans or credit than traditional businesses. He believes that the global government bond market is basically going to be the one that defaults unless the global central banks print more money.
Filecoin (FIL) is a big beneficiary of this AI-crypto crossover, according to Hayes. Filecoin, which has already experienced a massive hype cycle and saw a significant drop from its peak, is positioned to grow due to the increasing amount of computational power (PetaFLOPS) being added to its network.
However, Hayes warns that investing in AI now might not yield immediate returns. He argues that many companies in the space are overvalued, have a lengthy timeline to an IPO or a long token lockup period, and might just have a poor product-market fit with a high number of users but a low number of paying subscribers.
These three manias together are going to produce the 80-year biggest asset bubble that we’ve had since the Great Depression in the 1930s, Hayes noted.