Expression -- Arthur Hayes
Fed Pivot, ETF, and some areas of crypto that don't make sense
Arthur talks briefly about the Fed Pivot, some aspects of crypto that he is not so enthusiastic on, and the Bitcoin ETF
Jay Powell and the Fed Pivot
The December FOMC was the explicit event where the Fed decided to pivot – he indicated that the Fed anticipates 3 rate cuts the next year
Just 2 weeks before, Powell said it was “too soon to speculate on rate cuts”
Arthur thinks this is primarily motivated around re-election – a politician’s number 1 goal is to be re-elected and the most important thing to do is to get the economy in order
Expect financial assets to moon, up until either a recession or significant inflation returns
Other nations benefit - a weakening dollar is a situation where everyone wins
Value Traps in Crypto
Categories within crypto that make no sense to Arthur
Permissioned DeFi
What the fuck is a centralized decentralized financial network?
Arthur thinks this framing is to allow institutions restricted from regular to DeFi to line up retail that wants to try out a new product. Why? Institutions don’t wanna trade against other institutions
“After the hype fades, these permissionsed DeFi markets will just be a circle jerk of high frequency trading shops sitting on the bid and ask waiting for the other to cross the spread and get fucked”
RWA
RWA projects take things like property, securities, etc. and create an SPV, offer fractionalized ownership via tokenization
Why pay a premium for decentralization when a centralization option already exists?
RWA, particularly real estate makes no sense. Specifically:
Owning a fraction of a house provides no utility (you can’t live in it)
Houses are also unique.. how do you capture this in fractionalized forms
Lastly, REITs exist. Why not use those instead?
RWA Debt
Stablecoins like USDC / USDT take your $ and buy debt with it. But they don’t share it with you. Yield bearing stables are the version that does share the yield
Using and holding these aren’t bad, but why hold the project’s governance token?
Think of the project’s governance token as a distant proxy bet against rates. “If rates stay above zero, project will accrue profit, maybe they pass it to token holders. If rates decline, project will lose money”
You can just long / short a bond ETF (and apply leverage) if you really want to bet on rates directionally
The BTC ETF
If ETFs are too successful they will destroy BTC. Why?
ETF providers take too much of BTC supply means coins wont move around within the network
“The end result is miners turn off their machines as they can no longer pay for the energy required”
Its beautiful in that if BTC becomes another state controlled asset, it then dies
Election Year
2024 is one of the years with the highest number of national elections
For politicians looking to get elected, they need to give handouts to the people
For the rich, Give asset holders loose financial conditions -> print money
For the poor, give them handouts to cover food and rent
For middle class give them democracy, tell them to pay taxes, bend them over and be glad they get a vote
“The votes from those that benefit from currency debasement will outweigh hte votes from those who suffer
Currency debasement is the rule and not the exception
And as always, Arthur’s solution is to bid Bitcoin
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Great thread.