Virtual Fireside Chat: Arthur Hayes - TOKEN2049 Singapore 2022

excellent got a good see everybody again today Archer good to have you on screen uh guys I think everybody knows Arthur as a co-founder of bixmax as the author of this blog as crypto Haze and today we're gonna have the chance to spend a good 25 minutes really discussing what Archer hearing his views on many of the big developments going on uh by the way Andrews Archer one thing you may not know about Arthur is that in University he was a serious bodybuilder and now obviously switch to yoga so here you go a lot of parts lead to crypto Archer great to have you on stage with us today virtually good morning you [ __ ] [Laughter] oh man Archer we have a lot of things to talk about good to see you okay good to see you you're doing well Arthur is we're going to talk today about macro about some later ones about the merge of sources there's a lot of things we want to hear your view let's start about a very light topic your views on what's happening on the macro markets right now where do you think we are in the cycle is this bear Market going to continue I can tell you that we're in Singapore here there's no sign of a bear Market it's good old bull market days if you look at it with the energy in the room and what's happening what you think what's your view on where we are in the cycle and what what what what what what's your for uh how's the pat looking at from your perspective yeah so I guess the unfortunate part of all this is that we're a dollar based world and our daddies at the FED have decided to remove the punch bowl and increase um the interest rates obviously and remove dollar liquidity from the world and we've seen equities bonds Commodities crypto everything get their ass kicked uh in 2022 and it doesn't seem like you know Jay Powell is going to let up on on this fight to tame inflation in in the United States but on the other hand we've seen some some impact on other central banks out there most certainly the bank of England uh was it yesterday when they essentially had to basically enact yield curve control on the long end of the guilt curve because mortgage payers in UK were about to see their rates Skyrocket and affordability decline in housing you were about to see some Pension funds uh probably go bankrupt because of margin calls on derivatives they had on on rates and so we have this situation where the reserve currency is tightening and we're seeing Ripple effects in Europe obviously you have Japan uh close by where you know the boj is continuing what I think is an idiotic policy of capping rates on the 10-year bond at 25 basis points but again all that really doesn't matter because until the FED starts to give dollars again to the economy World economy assets like crypto equities are going to struggle do I think that Bitcoin and ether and some of these other large caps have probably reached their their bottom that we saw in June probably are we going to chop around here for for maybe the next you know three to nine months until you know the FED breaks something so egregiously that they have to reverse courses are printing money again probably so I think we're in it for a bit of you know low volume sideways for for a while and you know we're not going to be back at you know 30 40 50 000 Bitcoin anytime soon so a lot of sideways activity coming up but what about some of the catalysts you know obviously recently with the merge happening a couple weeks ago I was reading in one of your blog posts recently that one of the main things you're watching right now is obviously what's going to happen with block issuance uh on eat what's your view on the on the on the merge you think obviously there's you think we're going to obviously eat become a deflationary currency what's going to be a practical impact and what can this act as a catalyst when it comes to ethereum in particular so I think the only thing in my mind that really matters for the merge is okay we removed I think about 12 13 000 ish ease Supply every day and to me that's the only story now it's going to take a while for that to feed into the price just like when Bitcoin havings happen is not as if the price of Bitcoin automatically skyrockets when uh the block reward has it takes a bit of time uh also we have this negative macro environment of a dollar that sort of bashed everything now you know if you look at the you know eat for his Bitcoin cross it has continued to oscillate on an upward Trend so I'm not super you know dismayed About Eve I still believe that it can outperform you know over the next six to nine months Even If the Fed continues to remove liquidity and Bitcoin and some other cryptos essentially just stagnant because again we removed all the supply from the market and that to me is the most important thing when I look at if and as long as that keeps happening I'm very happy to continue to have my long position in need and more a part of like you know EIP y599 some of the burn and all the elements you mentioned I mean I remember in the early days used to be very anti-eat uh let's say you're not a fan uh what what is the big change I mean why obviously recently you've changed your tune like is it in addition to obviously some of the the merge and some of the uh the burn mechanism is it are you more bullish because of the level activity on it on the ecosystem is it other factors what what changed uh Arthur Hayes view on ethereum so I think I've said this a few times uh so I started out being a super hater of eth uh when they did their crowd sale and I think it was a 2014 or whatever it was I said this is a pure [ __ ] coin no Supply how could you give these guys any money I wish I bought some obviously um and then I called it a double-digit stick coin when I went down from I think about 1400 at the all-time high at that time down in a single like 66 or something around there was the was the low and then starting after the you know March 2020 you know covet nonsense uh then I saw some chart posted somewhere and someone showed okay the value of all daps is greater than the value of Eve as a market cap function I was like okay well there's one or two things is happening here either ether supremely undervalued or all these daps are worth significantly less now this is when all these you know the icos have gone down like 99 so okay are they gonna really like whoever's who's left to sell these things they've already gotten crushed so to my mind that meant he has some value and so I went pretty long Ethan you know has done done very well for me on that trade yeah but at the end of the day I think it's all about decentralized finance and all these applications that are starting to be used right we have lending protocols we have what I think is one of the most beautiful pieces of financial technology the automated Market maker and uniswap Sushi one-inch uh balancer all of all of these dexes you have now moving into the derivative space people trying to ideate on like how do we create a decentralized derivatives exchange you have insurance you have all these different Financial Primitives being built on Eve and only not only being built but actually having usage people are spending time and money and gas to use these things which wasn't the case back in you know 2017 2018 but the landscape has completely changed and then when you take a look at eth versus other l1s in my mind it's all about how many developers are there who's who's building stuff right because great you can raise a bunch of money from some Muppets and you know launch your token and it goes up but at the end of the day if no one's building anything then you're just gonna be vaporware very very quickly and so you know eth has a commanding share of the developer tunnel into the decentralized space and I think that's going to continue and that's why I feel strong that Ethan's going to continue to to perform well but how worried are you Arthur about for example following the move to proof of stake now we have kind of a centralization problem with coinbase Kraken the light or basically having more than 50 of the the staking capacity how worried are you about that do you think that could be a detriment to ethereum or there's some positive angle to that ironic concentration yeah I think from an ideological perspective it's an abject failure now obviously it's only been a few a week or so so you know give it some time hopefully things change right uh but if you're like okay if I'm trying to make a financial return and put aside what I believe about decentralization and such as resistance people have made a lot of money investing in essentially American-owned or chinese-owned Tech right and you're essentially handing your data over to one of these spheres of influence it's not as if the government isn't seeing everything all your cat picks and whatever kind of stuff you put on your phone and Tick Tock and Instagram but you can still make a lot of money in these stocks same with ethereum right yeah could it just be a centralized version of the US government coin could be we'll see if that actually happens doesn't mean that you can't make money no um I think when the if the market actually starts freaking out about this it's longer the tooth and that'll be you know further down the road and by that point hopefully I have seen enough signs and you know I can go back to the one true love on bitcoin balance my portfolio away from me going back to your true love on that side how what's your view on uh ethereum proof of work obviously you were there when we had the whole ethereum classic uh let's say moment what's reviewing eat W do you think we'll it'll be there or remain there'll be activity uh we'll be talking about it one year from now what do you think about it so I think I was reading somewhere I saw some of that I think ew is like I know five or ten bucks but however much it's worth right now I was like okay well how do I split my my um my coins right and I'm pretty Savvy with this stuff I can navigate my way around um different protocols it's not entirely it's not self-evident of how easy it is to do this right and so if I'm finding it a little bit difficult to find information on like how do I like split my coins get my ew and then I gotta go send it to an exchange and then I gotta gotta sell it what about the average person who literally just wants to like experience using uniswap or want it to borrow and land on compound are they really gonna [ __ ] around at metamask trying to figure out which ethereum they're going to use they're just going to use the one use ethereum okay and if metamast says that ethereum is a group of stake that's all the ethereum most users are ever going to know and so I think that's the problem with ew is is just too many steps to get there and so you're not going to have any real usage and if you're not going to have any real usage then no one's going to develop on it and then okay the miners might put some hash power to it to recover some of their capex costs that they lost when uh after the merge but are they really going to continue running these machines that are expensive for electricity and depreciation to upkeep this chain that you know no one's really using so I you know I think short term it'll be there will it always exist probably it'll always have a price will it slowly go down over time just like Bitcoin cash and some of these other things that came in existence you know after in the 2000 and well the 2017 block size Wars I think it's gonna follow us something similar to that interesting I mean let's see what happens uh on that perspective I mean you mentioned before D5 obviously it's very interesting what's happening there some of the usage and activity there you know one obviously one other vertical of crypto that has boomed in recent years is really what's happening with with perps I mean something that you guys at bitmex literally invented uh what's your view on the crypto derivative space do you think we're going to see increased level activity more instruments come in the market as part of Natural Evolution of the crypto industry or and how are you seeing crypto derivatives you think will evolve over the next couple of years so I think the next days of crypto derivative just like anything and the words going on and sort of the borrowing and lending Market the fixed income Market yeah and we need something that's like truly crypto I think we just experienced Trad fight um crypto about these are credit Cycles with the couple apps with three arrows and Genesis and you know Galaxy not Galaxy Voyager and something all these other all these other s all these other centralized lending platforms that was picked that's definitely you know bread and butter fixed income and I could give you the secrets of events that happen in June and you could have mistaken that for the Asian financial crisis you know you know Russian debt crisis tequila crisis Argentino you know pick pick a creative boom buff cycle that happened in crypto that's not what we're talking about I'm talking about something that's natively crypto and I think that's going to come out of the staking ecosystem now that we have this you know staking yield from ethereum second largest crypto you know hundreds of billions of dollars a market cap on this on this chain and now we have the yield what are all the different types of native things that we can build on top of this what are all the use cases that we can you know help people out who are have their needs locked who want to get some income maybe somebody wants to create sort of an eat like Bond you know how do we do that so it's similar to how you know some of the bankers uh created all of these interest only principle only all these different strips of financial products in the mortgage Market in the late 80s early 90s because that was you know evolution of derivatives I think we can do the same thing here with eth and ether is going to be the poster child and how we do this because we have such a large captive audience of people who Now understand okay I've got this thing it yields something here is a circle of you know surface of risk that I want to either accept or offload to somebody else and I want to do that on chain I don't want to use some sort of you know centralized entity to do this I want to be in the pure d5s stuff and so I think that's where we're going to go for the next flavor of derivatives and what I'm super excited to see what people come up with exactly for something a baby that you guys created actually maybe not you mentioned institutional investors like you know the traffic I mean you spend many years in traffic before joining the crypto bandwagon and uh you know when we from when we both started crypto trash fight was not even looking at crypto what's from a scale to one to ten where do you think our financial institutions with crypto end do you think actually some of the recent events we've had could potentially ironically as a catalyst to the entry of these stratified firms where they bring their risk management counterparty risk and some of those lessons that they the experience that they have in those areas yeah so if you want to talk about like who could manage a centralized trading operation the best it would probably be a tread by player now I think it's kind of like it's a two-step you know one step forward two steps back kind of thing for these Threat by institutions right because if you're thinking about one of these Bitcoin blockchain teams right they have to get us a lot of political Capital to do anything in the organization because a lot of what they're you know the ideology that we're espousing is essentially like let's completely destroy all these institutions and create something that's better and cheaper and more inclusive for the global population but then these guys want to you know come on board and try to trade it and use it use the services so you've got this like job risk of being on one of these blockchain crypto teams and so when bitcoin's at 70 000 that's almost job risk let's do crypto when Bitcoin does 17 500 there's a lot of job risks hey let me go trade s p and NASDAQ you know and in The Usual Suspects right so I think it's you know it's a fair weather friend kind of thing and the volumes are there and the interest is there when the price is going up because we're all human and we're all very Pro cyclical and you know our interest in these things there's going to be fees to be made and they're going to be there and they're going to service their clients and they're going to come up with solutions for them but you know are they going to help bring forward new you know Primitives technology ideas you know create new products absolutely not they're followers and so it's up to people who actually have real problems to solve um and probably you know less developed um Nations or maybe less financially mobile places they're the ones going to come up with the new stuff because they have actual problems to solve and here's this new system how can we use this new system to solve problems that I have yeah you know the large too big to feel Banks don't have problems they're making plenty of money you know they you know Finance as an industry it's a percentage of world gpp that the highest ever been so well there is no need for crypto for them they're doing real real talking about too big to fail actually what's your view of algorithmic stable coins was Luna the final nail in that coffin or you think we'll see the emergence of other algorithmic stable coins over the next couple years it's kind of like you know you know you go to the beach sometime and you see those guys and gals with the metal detectors and they're like searching for for gold on the beach yep because like maybe they like you know saw something on TV that you know I can go make however many thousand dollars if I buy this piece of equipment and go on the beach and they probably have never found anything but they keep doing it I think that's what algorithmic stable coins is going to be like you know it's it's the Philosopher's Stone can I turn lead into gold and we kept thinking we could do this for you know hundreds of years until we discovered uh the atom and helping to actually work right so will our algorithmic stable coins continue absolutely they will be another flavor of this thing or flavors you know because essentially it's an economic game of chicken you know how much money can I make before it blows up and humans don't learn we do the same thing over and over and over again and you know Tara was not the first one of these and it won't be the last um hopefully the next version doesn't lose 40 billion dollars in three days but you know we're all human we're talking about new version versions and new flavors of course you started bitmex I mean there's been many other crypto companies that have emerged what is the one crypto company that has impressed you the most whether it's centralized or decentralized over the years I wouldn't I guess it's not a company and maybe you know giving uniswap the the battle is probably giving them too much credit because they obviously built themselves on the shoulders of others correct but I think the the spot amm automated Market maker is to me probably one of the most beautiful things I've ever seen go on this website there's just two little fields choose two currencies how much you want to swap with uh one to the other to connect your metamask or whatever you know wallet that you want to use and boom you're training 24 7. yeah you know as fast as the ethereum blockchain or whichever one another L1 that you're using can work you can trade and it's it's so easy it's so intuitive uh and to me it's just beautiful and I think that's probably the thing that's impressed me the most yeah there's been a permanent loss other things but really The Innovation that has enacted has been quite uh quite impressive um Archer we have like five minutes I want to cover some more some personal topics as well you know uh first of all we're in Singapore today obviously this you've been living in Asia for many many years you're in Hong Kong initially and uh you know back in the day when we were starting crypto Asia had an outsized role in crypto globally many of the large companies we have around the world actually were created in Hong Kong or in Singapore and Asia do you think and of course this has stopped big time during covid uh and the approach that was taken do you think Asia will regain its outsized role in crypto globally now that we're putting covet behind us I mean I guess crypto and every other if you want to call it economy right you're raising land mass called the 75 of the population at 75 of the energy in the world and you know probably more than just most of the cheapest energy so if you think about that from that perspective absolutely this is the region of the world that's going to lead things and it's the region of the world that's very diverse in terms of development right and so you have hyper developed places like Singapore Hong Kong you have like broader developed places you know they pick Myanmar or something or something like that right and but none of these places are the of the United States of America with the ability to print US Dollars and so without that sort of privilege you have to be a lot more Innovative in what you're doing and if you want to separate yourself from that sphere and create your own space then you have to think a little bit differently you have to allow innovation in areas which maybe you wouldn't otherwise have done so I think that the energy that's we've seen in Asia in crypto from its start till today obviously there's a bit of a pause I think that's going to re-accelerate and I mean it's judging by the energy in Singapore uh for this conference I think we can definitely see that Asia has is not going to drop off all this that's the way I looked here aren't you in a minute so I think one thing that you know we've been on stage many times together and I think one thing you're known as a bad boy of crypto people known as crypto Hayes this your bodybuilding and this but you also done a lot of philanthropic work which I think is one of the things not many people know in crypto uh that you've been involved in can you share me more about that in like 30 seconds about some of the philanthropic work you've been doing because I think people should know about it yeah at a high level like care about financial literacy for kids right so I got I was lucky enough to get about a 80 000 US dollar scholarship beginning University from an organization called the Jackie Robinson organization and you know I've heavily supported them helped build part of the museum that just opened downtown New York but at a at a higher level I think it's you know quite sad at the general level of financial literacy globally in America just you know one place and so I want to help kids learn about finance and not necessarily crypto because I think once you understand how the system actually works and maybe you don't think it works in your favor all that time all the time and then you see this Bitcoin thing like ah now I get why these guys they're so religious about this and why they think that this can actually be so helpful to the vast majority of the people who are not participating in the and in the system so that's sort of what I'm aimed at I'll be rolling out some programs starting in uh the us and this this winter and early next year to you know help educate kids on just Basic Finance I love it I actually I think you're right crypto has brought more financial literacy as somebody's been a university Professor for many years then actually many many other textbooks that we have in traffic before we let you go the my best friend the Bell is back so we have to go through the traditional round of quick fast question so I need one or two Word answers and the bell is here to keep us honest you ready yep so Archer you're a big yoga practitioner what's your favorite type of yoga ayengar oh wow interesting meditation you meditate or no yes any type of meditation no usually if it's sitting on my block for about 10 minutes every morning here we go so that's very good you're a body builder what's the you think the most impressive bodybuilder that we've had in history Ronnie Coleman oh Reggie Goldman I thought he was going to say Arnold but here we go honey Coleman here you go uh Archer Hayes if you were not in crypto what other industry would you be Party Planner yeah [Laughter] if uh okay um on a more serious note uh you you read a lot you're a big reader what are the what is the one or two uh authors you think the the room do you recommend that they read on topics you're following now that is oh man uh three body problem I kept the three body problem well we'll come back to that um Archer you went to Wharton right so today imagine your your nephew comes to you and says that he's debating between going to University joining a D5 protocol or joining a crypto startup University D5 protocol crypto startup which path you recommend he takes D5 protocol here we go why is that it's the future here we go if you could launch a new crypto business today what type of business would you launch um nft trading nft trading there you go interesting Archer you could launch a new startup today and you have a choice of one of these co-founders who do you want Elon Musk Mark Zuckerberg Kim Kardashian or dokwon oh Elon Musk Zuckerberg Kardashian best meme artist ever the best um uh and me to finish it off we have literally 10 seconds Archer to finish off our one-on-one here at token 2049 this year Archer you could have lunch or dinner with one person Dead or Alive lunch with one person Dead or Alive who would that be one person five Jay Powell what's up Jay Powell Jay Powell here we go that was Arthur Hazel he doesn't thank you very much Arthur for being with us and I'll pass it back to you Andrew