Full text of Arthur Hayes’ latest podcast: Talking about Trump’s new policies, Bitcoin reserves, investment strategies and the Korean market

Compiled by: Wu Shuo Blockchain

In this interview, Arthur Hayes, chief investment officer at Maelstrom and former CEO of BitMEX, shares his thoughts on the cryptocurrency space, including South Korea’s influence, possible regulatory changes brought about by the Trump administration, and the evolving nature of global financial markets. dynamic. Hayes emphasized South Korea’s significance as an important cryptocurrency market, supported by its active trading culture and technology acceptance. He also discusses investment strategies, meme coins, and macroeconomic trends that may shape the cryptocurrency space, predicting that the bull market will continue, driven by global inflationary policies. Despite his skepticism about the U.S. government’s direct adoption of Bitcoin reserves, Hayes believes the transition to digital assets is inevitable.

Original link: https://x.com/CryptoHayes/status/1863537733718999350

Hikaru: Arthur, how are you doing?

Arthur: Very good.

Hikaru: Great, it’s a pleasure to have you participate in this interview. We will discuss it in three parts today: first, your background; second, the potential impact of the Trump presidency on cryptocurrencies; and finally, your current view on the market, especially the Korean market. Very much looking forward to it! So to start off, could you briefly introduce yourself and Maelstrom? I'm curious, what inspires you to keep working hard and pursue the career you love?

Arthur: I studied at the Wharton School of Business at the University of Pennsylvania. I came to Asia in 2008 and worked at Deutsche Bank and Citibank, and gradually developed a strong interest in the financial services industry. After working there for five years, I stumbled upon the Bitcoin whitepaper when I was laid off from my position as an ETF trader and started getting into cryptocurrency trading. Later, in 2014, he founded BitMEX with two other co-founders. After stepping down as CEO in October 2020, I realized that I liked trading but not running companies, so I decided to create my own family office, and that's how Maelstrom came about. We are an early stage token fund invested entirely using my capital. Our goal is to outperform Bitcoin and Ethereum by investing in projects with potential.

Hikaru: Great! You mentioned BitMEX, which is very famous for pioneering derivatives and perpetual contracts in the cryptocurrency space. As one of the founders of BitMEX, how did you transition from BitMEX to your current role as Maelstrom CIO? What's the difference between the two? Which do you prefer?

Arthur: Managing a small company, from my perspective, a team of less than ten people, is really interesting. The early days of BitMEX were very enjoyable. As perpetual contracts gained popularity in 2018, we quickly grew into a larger company, with the number of employees increasing to approximately 250 people. But as a CEO, my daily work mainly involves human resources, legal and compliance issues, which were not my original intention to enter the cryptocurrency field. Fortunately, I no longer do those things and am only involved as a board member. At Maelstrom, I can focus on trading, investing, and ideation, and work with a small team of about six people. That’s what I’m really passionate about – financial markets, cryptocurrencies and learning about new projects and pushing the boundaries of decentralization.

An analysis of crypto regulation and macroeconomic trends in the Trump

era

Hikaru: That's great, I think that's why all of us in the cryptocurrency industry are so passionate. So now let’s talk about the topic that everyone is very excited about, which is the incoming Trump administration. It is predicted that they may implement friendlier crypto regulations, such as appointing a new SEC chairman (farewell Gensler), or even approve more altcoin spot ETFs, such as the rumored Solana and Ripple. So, I would like to ask, given this situation, what changes do you think will happen to the U.S. cryptocurrency market and even the global financial market in the next four years?

Arthur: I think we are gradually entering a stage where those who hold government bonds will realize that it is a bad investment because all the major governments around the world are having to print money and push inflation to try to inflate away the huge Government debt.

This is not only a problem for the United States, but all major countries such as the European Union, Japan, and China are facing the same dilemma. And politicians, whether elected or unelected, cannot accept austerity. Obviously, we saw Milley in Argentina, who was elected on the promise that he would cut the government budget and balance the books.

However, when he tried to do this, the Argentine economy performed terribly. I remember industrial output dropped by about 20%, which is a very alarming number. Because when you remove all credit from the system and reduce government services, people lose their jobs because there's no money being pumped into the system. I don't think any politician, elected or unelected, would want to govern an economy like Argentina's. So they choose to inflate their debt, which is exactly what Trump will do.

One major policy that people don't notice is that he has to print money. He needs to inflate GDP to grow enough to support the government's balance sheet. I know a lot of people are concerned about crypto regulation and its possible direction, but I think predicting possible crypto-friendly regulation in the United States is very speculative. Because there are many wealthy individuals with large holdings of crypto assets, their businesses may benefit from regulation. They will play the same games as the big banks, such as donating to the winning party, going into government and enacting regulatory policies that benefit themselves that may not be in the interest of cryptocurrency holders as a whole.

Maybe we will have a new SEC chairman, but that person may choose to go after everyone except Coinbase, we can't be sure. So I think it's reasonable to say that expectations that crypto regulation in the U.S. will drive adoption are high. But expectations in the market are often higher than reality. In fact, Trump is a statesman and the US Congress will be re-elected in two years. So he has up to 18 months to take action. Beyond that, he needs to fulfill his campaign promises, and not just in the crypto space. Therefore, I think it will be a case of "buy expectations, sell facts" and any policies he introduces may be positive in the long term but leave the market feeling less than ideal in the short term.

So if you’re jumping into the cryptocurrency space just because you think Trump will impose aggressive crypto regulation, you might be disappointed. However, I don’t think the crypto market will fall as a result, because ultimately the real sticking point will be Scott Bestant at the Treasury Department and the amount of money he needs to print in order to achieve Trump’s economic goals.

Discussion on the feasibility of U.S. Bitcoin reserves

Hikaru: Okay, that's a very realistic view. It’s a bit like how many token projects will release a beautiful white paper describing a grand vision, but the end result is just an MVP (minimum viable product). This is indeed an important fact that people need to know. I fully understand that there are many possible directions the United States and the Trump administration could go in terms of crypto regulation. But one topic in particular is about the United States’ National Bitcoin Reserve. Assuming that the U.S. government does launch a Bitcoin reserve program, a strategy to programmatically limit the total supply, how do you think this will impact the U.S. government and broader financial markets? What actions might other governments take?

Arthur: First of all, I don’t think Bitcoin reserves will actually happen. But I think the path they're taking to try to get there is highly instructive and generally positive for risk assets. If you read Senator Lummis’ draft bill on the Bitcoin Reserve, the most important part is how she plans to fund this reserve. She proposed two ways in which the U.S. government could purchase Bitcoin and build a strategic national reserve.

The first is for the Fed to return the interest earnings it earns on Treasuries and mortgage-backed securities to the Treasury. This amounts to billions of dollars every year. Therefore, she recommends using these payment funds to purchase Bitcoin. But the money is small, especially as the Fed is shrinking its Treasury portfolio and has losses elsewhere in its books. So I don't think this will make a big contribution to buying Bitcoin.

More importantly, she suggested reassessing the value of gold on the U.S. government’s balance sheet. The U.S. government currently holds about 80,100 metric tons of gold, which remains at $42.22 an ounce, a level set by Franklin Delano Roosevelt in 1933 by weakening the dollar. If gold were revalued to its current price of about $26,000 per ounce, this would result in a paper profit for the Treasury of about $700 billion. Therefore, the Treasury can use these funds to implement government projects or for Bitcoin purchases in the strategic reserve.

But if I were a politician, instead of buying Bitcoin, I could revalue gold, create these “virtual” funds, and use it to fund projects in my constituency, support the Green New Deal, or other initiatives like oil drilling. While I believe the U.S. government will devalue the U.S. dollar relative to gold, I do not believe the funds will be used to purchase Bitcoin, but rather for other government projects. Trump doesn’t have to go through Congress or cut spending, he can simply ask the Treasury to reset the price of gold to, say, $5,000, $10,000 or $20,000 an ounce. This automatically creates funds that can be used for a variety of political expenditures.

So, I think the enlightening part about the Bitcoin Strategic Reserve is that it's a process of rationalizing the way in which gold is revalued, freeing up profits on the Treasury's books and spending them.

Maelstrom’s investment strategy: Focus on value and timing

Hikaru: Very interesting. It can be seen that this strategy may be slightly different from what mass consumers think, but it will ultimately have a positive impact on the price of Bitcoin, so we will wait and see.

Next I want to talk about another topic. I believe many people are very interested in your investment and trading strategies, so I would like to ask. What criteria do you mainly focus on when it comes to trading or even long-term investing in digital assets?

Arthur: First of all, I require Akshat Vaidya, who is in charge of investment, to outperform the returns of Bitcoin and Ethereum. At Maelstrom, I employ a lot of people, and I could just invest my money directly into Bitcoin and Ethereum and see what happens. Therefore, if you want to actively invest in other projects, you must be able to surpass the performance of these two major cryptocurrencies.

We will try to grasp the cycle. I will have a macro liquidity perspective, and this will also be passed on to Akshat's investment considerations. For example, during the bear market in 2022 and 2023, we were very active and secured many extremely valuable transactions. Obviously, as more money flows into the cryptocurrency space, prices rise and transaction valuations become very expensive. So we slowed down our investment pace. We are very focused on price when entering a project because price is what you pay and value is what you get.

We cannot predict the future, but we know that if we can enter a token project at a very reasonable fully diluted valuation, even if the project performs poorly in the end, we can still make a profit as long as the token is online. But if we pay too high a valuation in a bull market because we are afraid of missing out, even if the project succeeds, we may not make any money by the time the token is launched. So we pay great attention to investment price. The next step is to see if this project fits a certain vertical field that we are interested in. But I always emphasize that the first criterion for investment is that the price must be cheap. Because if the price is low, we have more room to make mistakes on the technology landscape, the market fit of the team, or the time frame.

Hikaru: Very clear. This strategy of “high fully diluted valuation but no circulating tokens” is obviously not feasible in this cycle. So it's really important to make sure you're getting in at a reasonable price and not overpaying in a bull market.

Arthur: Yes, we all get excited easily and end up losing money.

Hikaru: Even with a lot of experience, it’s easy to move too quickly due to fear of missing out. So next I want to talk about a topic related to South Korea, which is our local market. I noticed that Maelstrom recently launched an official blog and you posted a lot of content in Korean. I would like to ask, what prompted you to decide to enter the Korean market? Where did your interest in Korea come from?

Arthur: I first noticed the Korean market probably during the ICO boom in 2017. At that time, token trading prices on Korean exchanges were 20%, 30%, or even 50% higher than elsewhere, with Bithumb being the dominant player. Thinking back to my days as a derivatives trader in a bank, about 10 to 15 years ago, South Korea's KOSPI options were the most liquid options market in the world, even though Seoul had the largest population of only 20 to 30 million. South Korea may have the highest trading activity per capita in the world.

Now, South Koreans are switching from speculative stock options trading to cryptocurrencies. They have a high level of Internet penetration, a well-educated population, and the upward channels from the middle to the upper levels of Korean society are relatively rigid. Some large companies and families control most of the resources, and it is difficult to develop upward simply by relying on intelligence or education. Cryptocurrencies therefore offer a completely new opportunity to this highly qualified segment of the population who are dissatisfied with social mobility. As a result, South Korea has become the market with the highest per capita crypto trading volume in the world.

I noticed when I was at BitMEX that the trading volume of Korean users was very strong. So, in the current investment landscape, we want to be closely connected to areas where users are active. Although there are technological innovations all over the world, the real users are mostly concentrated in Northeast and Central Asia. If you want to understand where large-scale cryptocurrency transactions are taking place, you must pay attention to these areas. Therefore, we decided to start in Korea and build a local language blog with professionals in the industry translating my English content to make it easy for the average Korean crypto investor to read and understand. That's why we wanted to enter this market because it's probably the most important market in the world from a pure cryptocurrency trading perspective.

South Korean Cryptocurrency Regulation and Potential Institutional

Involvement

Hikaru: I totally agree. If you look at Upbit, for example, it ranks at the top of the global spot centralized exchange trading volume rankings, behind only Coinbase and Binance. This really shows how popular the Korean market is. And the "kimchi premium" also exists. Earlier this year, when we were experiencing a mini-bull run, Bitcoin was trading at a price premium of up to 20% on these exchanges. Additionally, Koreans are very enthusiastic about tokens such as Dogecoin and Ripple. So, I think the market is very hot and will continue to grow as more cryptocurrency regulation comes out, which will bring clearer rules for exchanges and consumers. I would like to ask, what do you think of the future of the Korean digital asset market? How will the market landscape change as more regulations are introduced?

Arthur: If I remember correctly, South Korea is currently voting on a tax bill. I heard that this bill mainly deals with capital gains tax and cryptocurrency-related tax issues. It sounds like this bill may be delayed because South Korea has a high percentage of cryptocurrency traders and apparently they don’t want to pay high taxes on these transactions. If tax policy is ultimately implemented, it will need to be done in a way that does not significantly inhibit trading volumes. So, I'm looking forward to seeing what the politicians decide today (around November 26th).

Additionally, I think an important question is whether institutions in South Korea will be involved in cryptocurrency trading. At present, I understand that only personal accounts can be opened on Korean exchanges, and corporate accounts have not yet been opened. If these institutions can participate in the future, such as taking advantage of the high liquidity and activity of the market and providing services to the millions of Koreans who hold cryptocurrencies, this will create huge demand. In addition, if South Korea allows foreigners to open accounts in their own names, it will attract more external liquidity into the Korean market, helping to balance the price premium caused by excessive heat for certain tokens.

Since South Korea has a large base of cryptocurrency supporters, politicians who might try to restrict cryptocurrencies in the interests of traditional finance appear to be worried about losing the votes of the young, active crypto community. So I think this is a very instructive example of what happens when a young, active, and increasingly wealthy group of cryptocurrency holders begins to wield their political influence. This situation could become a microcosm for the rest of the world. Younger generations and crypto-asset holders will try to use political power to push for regulations that serve their own interests, not just regulations that serve the traditional asset classes that existed before they were born.

Insights on meme coins and their speculative nature

Hikaru: You mentioned a very interesting dynamic, especially with South Korea going through the Terra Luna collapse. Many lawmakers realize that digital assets are the future, but the key is taking these steps carefully. Education is important, as is ensuring that something like the Terra Luna debacle never happens again. So they're taking great care as they move forward, laying the groundwork not just for the next few months, but for the decades to come. This is indeed a good point. Now I want to switch to a fun topic: What is your favorite meme coin?

Arthur: My favorite meme coin? Of course, I'll only talk about what I own. I love GOAT, a meme coin created by the Truth Terminal AI agent. I think this is one of the first meme coins created by an AI Large Language Model (LLM) agent, and there will definitely be different variations on various themes in the future, but generally speaking, groundbreaking themes will retain their value. Therefore, I think GOAT is likely to maintain a market cap between $1 billion and $5 billion for quite some time, rather than going to zero as quickly as many other meme coins.

In addition, I am interested in some projects in the field of decentralized science (DeSci), such as Worm, which I find interesting and hilarious. Other than that, there aren’t many meme coins that I follow. I often hear various discussions about meme coins. In Maelstrom’s internal chats, young analysts are always sharing the dynamics of various meme coins. I'll occasionally check out what's interesting and buy some. It's a fun game and I enjoy it. Of course, I didn't invest much money, it was purely speculation and gambling. But I think it is very enlightening because it can be used to understand human emotions and how this emotion is reflected in trading charts.

Hikaru: Indeed, regardless of the outcome, one thing we can all agree on is that we really enjoyed the process.

Arthur: Yes, in this universe we have to enjoy life and hopefully make some money in the process.

Summary thoughts on Bitcoin’s role in the current bull market

Hikaru: Of course, I also made new friends in the process. The social capital of the memecoin community is very strong, and this is not going away anytime soon.

Arthur: Indeed. Social media allows us to share viral memes across the internet, so why not try making money by predicting the next hot trend?

Hikaru: Totally agree. Well Arthur, thank you so much for sharing. I believe this means a lot to cryptocurrency investors around the world, especially as Bitcoin approaches $100,000. I have one final question, though: Is there a message you’d like to pass on to our Korean community as well as the global audience?

Arthur: I think you should continue to buy cryptocurrencies. We are still in a bull market. I know there are those who think Bitcoin may stagnate once it reaches $100,000, but the bottom line is that every major economy and government has committed to inflation to reduce debt rather than address the structural problems of their economic and political systems.

That being the case, we should be holding onto the asset that has performed best since the 2008 global financial crisis, and that is Bitcoin. Of course, the rest of the cryptocurrencies will follow. So don’t be discouraged if Trump’s encryption policies fall short of expectations. He will print money, China will print money, the European Central Bank will print money, Japan will print money, South Korea will print money, every country will print money. So, I think we're still in the early stages of an explosive bull market.

Hikaru: Totally agree. I think a lot of governments and financial markets are just trying to solve short-term problems with one quick fix after another, but ultimately we all know that's not going to last. And Bitcoin is the only long-term solution that can truly fundamentally solve the problem. Okay, thank you very much, Arthur. We look forward to inviting you again for interviews. Good luck to the bull market and let’s see how it turns out!

Arthur: Thanks for the invitation.

Hikaru: Thank you, Arthur.