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Arthur Hayes’ theory of everything: Why has the crypto winter started, and how will it end?

Igor Grigorchenko

News editor

Sep 12, 2022 at 12:21

Vitalik Buterin recently posted a survey to determine the most popular among the world’s three most important crypto influencers. Along with CZ (Binance) and SBF (FTX), he also named Arthur Hayes (ex-CEO of BitMEX) on his shortlist.

Many know Arthur as an excellent intellectual with many accurate predictions and even real prophecies about the future of crypto under his belt.

Now, when the market is storming again, and many people are losing hope and a real sense of what’s going on, we decided to take a closer look at Arthur’s general theory of everything. We have selected the most important things about this crypto prophet to bring you his visions for the market’s future.

Who is Arthur?

Three of the brightest milestones in the professional career of this crypto prophet:

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  • Arthur graduated from the Wharton School of Business, receiving a bachelor’s degree in economics and finance. After graduation, Hayes moved to Hong Kong and had a rapid career at Deutsche Bank. There he was a market maker for Deutsche Bank ETFs.
  • In January 2014, Hayes became interested in Bitcoin and voluntarily stepped down from banking Olympus to go freelance. Hayes created BitMEX, the world’s first derivative crypto exchange. And it was an incredible thing for the time!
  • In 2021, Arthur Hayes surrendered to U.S. authorities in Hawaii and was released on $10 million bail. He was charged with violating the bank secrecy law and was sentenced to two years probation. After leaving the big game and being under house arrest, Arthur developed a vigorous writing activity, starting to regularly share his unconventional and in-depth analysis of the crypto market. This is how his author’s blog and analytics began rapidly gaining popularity. 

Why should you care what he thinks?

Arthur has already made several accurate predictions in the crypto field. Many people even consider him an insider since he accurately pointed out important price levels.

Here are a few examples:

  • In early 2017, he accurately predicted Bitcoin reaching the $10k level, though it seemed just as unbelievable then as it does now to get to $100k.
  • He accurately predicted Bitcoin reaching the $50k level in 2018 when the U.S Securities and Exchange Commission (SEC) approved Bitcoin exchange-traded funds (ETFs). In that case, Bitcoin even slightly exceeded the stated target by reaching an incredible $60k.  

But how does he do it?

There’s really no mystery. Arthur is one of the few influencers in the crypto world with a damn good education and unique market experience. His main secret is that he has his own theory of everything, which he freely shares on his blog.

Just in case you’re wondering when the crypto winter will be over and a new bull market is coming, we’ll summarize his theory further below.

Helicopter view

Arthur Hayes exists at the level of synthetic macroeconomics, and from the layman’s perspective, it looks like Arthur is a bit stoned. So it’s hard for many to follow his high-level thought in its original form (as on his blog).

But we, as ordinary guys from the suburbs, will try to retell his views as much as possible for mere mortals (although this partly comes at the cost of accuracy, so we apologize in advance).

So, the Fed, as the global engine of the economy in the 2020s, fell into a kind of logical trap:

  • On the one hand, because of the energy crisis, the war in Europe, the Covid epidemic and other stuff, the Fed needs to cut rates to help the economy grow.
  • On the other hand, rising inflation urgently requires raising the key rate.

Hmm, now that’s the real problem. In chess, this situation is called a Zugzwang.

The bad news is that the Fed has chosen to raise rates after all. This has led to less money in the economy and a collapse in the emerging risk markets. The coming of the crypto winter with such an intentional decrease in liquidity was inevitable. Not only did Bitcoin collapse in the process, but gold and silver are also at their lows!

The good news is that the Fed has never yet raised rates in the face of a falling economy. Arthur believes a reversal of the Fed’s position is imminent — the beginning of a new money printing cycle after a brief policy tightening. That reversal may happen in 2023, or it may happen in 2024, but it is inevitable. And it will be a time of a grand new celebration in the crypto market!

So, the general chronology of events is as follows (stick this on your fridge door, so you don’t get anything mixed up):

  • First, there was Covid, and the Fed was forced to print money like crazy to save the economy frozen in lockdowns, as a side effect making a historic ATH in Bitcoin.
  • Then inflation began to accelerate as a reaction to the flow of free money, the response from the Fed was a temporary liquidity squeeze via a key rate hike, which caused the economy to slow down, and the crypto winter began (we are here now).
  • But the Fed cannot press the brake endlessly. It will soon be forced to reverse its position by falling markets. Western consumers and businesses are totally tied to the credit model of the economy, so the economy will not survive a high credit rate for long.

This reversal of Fed policy will happen in the very next few years, and it will be the beginning of a new, unprecedented bull market (yep, with a new ATH for Bitcoin).

Now for the million-dollar question — when exactly will the market reversal occur? I’m pretty sure the various market signals and indicators that Arthur carefully describes in his blog will warn us about it. 

Dollar/Euro parity

This is an important metric in Arthur’s theory that was predicted and achieved this summer — the dollar reached parity with the euro! At some points, the dollar was even worth more than the euro — that’s the real magic (if you haven’t read the prophet beforehand).

So, the time has come — Hayes reported that a disastrous #DoomLoop is being launched in the global financial system:

YCC — countdown to execution

The fall in the euro value against the dollar is only the first stage of Hayes’ scenario.

The primary catalyst for change in the financial world will be a further desperate attempt by central banks to control the Yield Curve (YCC) so that governments can pay off their debts.

The debt crisis is a new type of crisis that the world will face for the first time in its history. If you are impatient and want a ready-made solution right away instead of lots of clever words, here it is:

Important warning

To prevent an exodus from fiat, vulnerable to accelerating inflation (and unable to raise the rate high for protection), the government will apply moderating tools to limit the ability to invest.

In this regard, Arthur suggested looking at decentralized assets, which cannot be banned or restricted entirely, and whose value is almost independent of the traditional banking system.

“Any digital asset held by banks, regardless of currency, can be confiscated. You must log out completely,” he said.

The more any one state tries to “lock up” traditional capital inside the country — the deadlier it becomes, and the more actively it (the capital) looks for a way around the bans. Arthur explains this at length with historical examples from the U.S., Britain, Germany, and Japan during World War II.

And once again, the main conclusion is repeated as a mantra — the only right thing to do in this dramatic period, which is just beginning, is to hodl crypto. 

Bitcoin will reach $1 million per coin

What will happen when this transformation is completed? Hayes’ theory speaks of a gradual loss of confidence in government institutions in the background of accelerating inflation, signs already visible right outside your window today.

A change in the tactics of financial institutions (under pressure from this trend), which Arthur thinks will happen in the next few years, will cause an incredible bull market. During this rally, the value of defensive assets could reach amazing records.

Sapienti sat. To summarize, let’s end as usual with some good and bad news:

  • The good news: $1 million per Bitcoin is the next target Arthur is seriously advocating, which he says will be reached by 2030 (most likely sooner).
  • The bad news: have no illusions, because when that happens, that $1 million will not be the same as it is now. And Lambos will probably be selling for tens of millions of “new” dollars by then (as opposed to about $200,000 you’ll be expected to pay for the cheapest models today).

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