E142: Arthur Hayes: Buy Bitcoin Before 2028 (if you want to get rich)

25:05Of course. And maybe over a very short period of time, it outperforms Bitcoin. Or there's a lot of institutional money managers who can't get their head around Bitcoin, but they believe the same things that I do, money printing, geopolitical uncertainty. So they buy gold instead. But over a particular period of time, gold could outperform Bitcoin. So it's the same trade. It's a different type of person, a different type of mentality who is buying it. How do you size that? Well, thankfully, because I started Bitmix, my cost basis for a lot of the things that I own is very, very low because I created the business.

25:39But in terms of sizing, I have a portion of money that's just in TradFi, banks, and fiat stuff. And if you look in that portion, it's basically just T-bills and gold and gold miners. And so I have a crypto portion and it's done very well. So I have this sort of a barbell situation and that's kind of how I size it. You never have one moment where you say, I need to rebalance or put one, I have too much crypto. I'll put it in TratFi or actually TratFi is less relevant. I'll put more into Bitcoin. I just let it run. And so when the time comes when I believe that the money printing is going to slow versus the market expectations, then I sell everything.

26:19And then I got to figure out what I'm going to buy. I don't know what that is, but I'll figure it out when I get there. I just want to know a bit more about the gold miners because in 2020, I think, so I built a business in the UK and we had this SIPP, which is this self-investment pension plan where you can invest tax-free some money. And in 2020, there was a March crash, right? And after the March crush, I was like, wow, this is a massive opportunity to buy Bitcoin. Right. But with my SIPP, I couldn't buy Bitcoin. It was impossible. So I just thought, do I buy gold? Because it's kind of like similar to Bitcoin, but it's the only thing I can buy.

27:01I mean, a gold ETF, right? Or do I buy a gold miner ETF? And then my rationale was, my rationale was, I'll buy the gold miners because it's basically gold, but more volatile. I think over the next few years, gold is going to go up. Bitcoin is going to go up a lot. Gold is going to go up less. But I want to do something closer to Bitcoin, but I can't. So I'm just going to buy gold miners because it's more volatile. Fast forward a few years later, actually it was probably a few months ago. I checked and I was like, fuck man, this gold miner ETF hasn't even performed gold. How does the dynamic of gold, because for me, if I look at the chart of gold miners, I see the, this, and then goes up like crazy, goes down back to almost zero.

27:47Every time there's a sort of bull market. So it's not the same as, it's not the same as, it's a levered play, but if gold goes up slowly, but surely the gold miners, it's not really that it's like more, if there's a bull market, they go up, then they go back down to like almost same price as before. I mean, I think it's more, it's a commodity cycle, right? So if you know, if you believe in sort of where it's just the beginnings of a commodity super cycle and producers of commodities, gold miners are, you know. commodity producing companies, then over time they'll outperform the actual performance of the underlying.

28:21Again, depends on where you got in, right? Price is what you pay value is what you get. So it's all about market timing and whatnot. Where do you think Bitcoin stops? Do you think there's ever one day where the whole Bitcoin thing is not relevant anymore? I don't know. I mean, I'll be dead by that point. I have no idea. I haven't really thought about it. I don't know. Quick one. I want to thank our partners who help us make this show possible. Thank you, Treasurer. My favorite cold wallet to store my crypto and make sure I sleep well at night. If you want to order a Treasurer wallet and sleep well at night too, you can use my promo code WSH10 to get a 10 % discount.

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29:39you started to mention before you mentioned EtherFi, Athena the antithesis of Bitcoin is a protocol that generates revenue and profit and hopefully buybacks their token kind of a big narrative now are revenue and buybacks a true fundamental factor that crypto investors should base their investing thesis on or is it more sort of meme that helps some protocol capture mindshare, but doesn't always end up in token outperformance? I think at the end of the day, everyone's investing because they believe there's going to be some real activity on a particular chain. And real activity is going to do some sort of cashflow generation.

30:22Outside of Bitcoin, which is like, I'm going to outperform fiat. You're not investing in Bitcoin to make money from a cashflow perspective. But all these other decentralized applications, they're disintermediating some business that charges people money and gives them that money back to their equity holders or bondholders or whatever. And so from a token standpoint in this decentralized application ecosystem, we all are eventually believing that there will be some cash flow generation. But over successful cycles, we found that most projects have not done that. Number one, they probably don't have any clients.

30:56That's the vast majority. No clients, no product market fit, no cash flow. than there is the ones that are successful, but then for whatever reason, don't give any of that value back to the token holders. And I think investors have gotten tired of these two scenarios. And after ICOs really came into creation in what, 2015, 2014, whatever, around the time that Ethereum went live, we had the first ICO craze, which is just put up a website. Hey, I got a token, buy it, right? And then we got to 2020, you know, Taylor 21, DeFi Summer hey, we got these economic games that we're going to play, we're going to get a bunch of users but we're going to incentivize it with this token that basically goes to zero over time no one's paying for anything anything other than our own token we did that, you know boom, crash we got to 2023, 2024 which was, hey we have all these crypto VCs they invest in these projects, they play this game they have a high FDV a low float so they can pump the price and then hopefully dump on people when it lists on a centralized exchange.

32:05Retail got wise to that. They can stop trading these things and say, no, this is, dog, should I get the air dump? I can just dump it. There's no long-term value here. And now we have a subset of projects that have done extremely well over the last two years, the true alt season, which are ones that have clients that pay real money and that money comes back to me or you as the token holder. And these have been the best performing projects in this cycle in terms of a new issue. Obviously, Hyperliquid is the best example of that. So I think it's an evolution of expectations of investors who we have sort of come up the curve and what we've expected as this new issue market has matured over time.

32:42You mentioned Hyperliquid, and you also said before I'm the inventor of the perpetual contracts. What makes Hyperliquid so different from all the other projects that are attempting or have attempted to dominate the decks and perps gain? So I think it's the right time, right place, and right tokenomics model. I think obviously there's lots of people for whatever reason have been kicked off their favorite centralized exchange or the product that they want to trade are not offered and the leverage they want to trade for whatever reason. And here's this decentralized exchange that's built very performantly and they can trade how they want to trade just by connecting their wallet and trading.

33:21And then most importantly is that the hype team said, okay, we're going to give all this revenue back to the token holders. will give a massive airdrop. And now the whole community is incentivized to trade on this one platform because they're getting the value back. Versus a protocol like DYDX, which was very innovative at its time, a dominating next protocol, price went bananas, massive FTV. If I would have got maybe 20 or 30 billion FTV at its height back in 21 or 22, whenever it was. But they refused to pay any money to the token holders. It doesn't matter why. It just didn't happen. And so you saw that price go from whatever value it is to basically nothing.

33:57And it's getting completely, you know, their asses kicked by Hyperliquid and other perpdexes that are saying, okay, well, the customer wants to own a part of this. And they expect that as an owner, they should receive a part of the value that we're creating by offering the service to the community. So that's what they've done very, very well. How much space do you think there is for others in this market? Because obviously, like, you see the success and then people start to copy, as usual. But in crypto, it's very short-term. There's all these incentives and then liquidity moves around, but holding something for a long time is a bit like a, it's a bit like a nightclub.

34:38A nightclub usually is one, two, three years, right? And then boom, gone. And then the next one and the next one. And you kind of have to either sell or renovate the whole thing and kind of have to rehype the thing for it to work. So holding people's, capturing people's attention, holding it in the long term, getting them to keep the token all that stuff is so hard how much do you think there is space for others to actually be very successful in the long term in this specific sector I think most of the perp decks will be zeros and there will be a few that will survive based on liquidity moat that they're able to generate and so hopefully hype is one of those they are facing their I call it the chatification moment where someone says oh that's a great model how would I take your fees down to zero and see if you can survive because I have more capital than you and I don't need to make money for whatever reason I have another business that does well.

35:25And so I'm doing this to make sure my clients stay in my ecosystem. So I'll zero you, see if you can survive hype because your value is, Hey, I buy back the token based on revenue. Well, if you have no revenue, then why should anyone own your token? So we're going to see what happens. I don't know. Are there other levers that they can pull in terms of the generate value for the token holder by offering some differentiated service that clients are willing to pay for? If there's another solution that is almost as good or maybe as good, that's free. Absolutely. There's a trend. There's a, these guys from, from Paradex, for example, they just say zero fees.

35:56Right. And probably, do you think everyone will, Aster or whatever, everyone will just get there and say zero fees. Maybe we'll see. I mean, obviously there's a cost to running these things, right? There's server costs and whatever. And so, but again, is there something else in your business model, whatever it is, where you're going to make the money to, you know, keep your thing going? What could that thing be? I have no idea. You don't know. Having run yourself a purpose exchange, you don't know, like what are other kind of ways to make money? with, I don't know, because I'm actually wondering, I'm just like, how do these people do?

36:28Well, maybe I think the great thing about this permissionless environment is there's going to be new business models created where, okay, well, somebody made a lot of money in the very simple, you know, buy, sell trading thing. Okay, well, that got zero to zero fees. Cool, the customer's happy, but okay, well, we need to offer this service profitably. What else can we do? I don't know. There's going to be some very interesting entrepreneurs who are going to come up with something interesting. So we'll see what they do. Yeah. It's a bit the same as in the stable coins space, right? You have these stable coins that they earn yield and they can just say, we could make all this, for example, a new chain could say, we make all the transfer for free because we make so much money on the yield itself of the stable coin, which is a completely new, different model that was just not there before.

37:14Yeah, exactly. You mentioned the Hyperliquid, $5 ,000 per hype. Are you still a big believer of that? Yes. I think by 2028 it is possible. Again, we're going to have to see how they get through this moment where you have competitors offering zero to free trading. Is their tech that good? Are they able to roll out some new feature that's going to capture the client? But if you think of a macro level, there's going to be millions or billions more people using stable coins with, I think, trillions of dollars of assets willing to speculate on. And so who's going to be there to service that customer?

37:48And whoever's there, and I think Hype can make it through because they've done such a good job so far, they're going to be massively valued as a protocol. I read someone the other day who wrote, everyone will be trading perps. Do you believe in that? I don't know if everyone will be trading perps, but I think for your median trader, they'll trade a perp on FX, Bitcoin, crypto, they'll trade a perp on a stock, they'll trade a perp on a bond, whatever. It's a great product because of this hyper-gamified, hyper-leveraged ecosystem that we've created. And I think everyone's moving toward this. unfortunately most people are broke as fuck and the only way out of their situation is to take massive leverage on whatever it is they want to trade.

38:27And so the perp is the perfect vehicle for that. Do you really believe that's the right way to make it? I don't believe in right or wrong. That is the way. If everyone wants to believe that's the wrong way, go in the streets and depose all these governments that are doing this to you and then we'll see. Tell me about EtherFi. You said, hey, we invested in these two protocols in the bear market, Athena, that we talked about before, EtherFi. Why is EtherFi so great, except the fact that obviously you're an early investor? So obviously they started out as a restaking protocol. They crushed it on that, and then they pivoted to trying to become this crypto neobank.

39:08And as someone who's been in the crypto ecosystem for over a decade, the biggest promise was, hey, I can load some crypto into this wallet, and then I can have a link to the offline buying experience where I can just tap my card or swipe it or whatever and I can spend my money. And there's been multiple different issuers who have tried this. The fees have been egregious. Very hard to get accounts. Didn't work a lot of places. And then finally Etherfy, they did a lot of hard work. And your Etherfy card, which can be in your Apple wallet or it can be a physical card, and you can tap and spend all over the world anywhere that Visa is accepted.

39:41And I've got to use it. It's a great product. Obviously more and more people are using it And this is what I'm super excited about for this particular protocol is taking this, you know, great product they built, E3 Staking. Okay, what else can we do now that we have all these assets on chain? Okay, well, let's let people borrow and spend against them, but in an offline way where they couldn't before. And so that's why I'm super bullish on their ability to be, I call it the MX of crypto. You know, it's not, they're not for everyone. It's not for, you know, they're not saying we're going to bank the unbanked, all that bullshit.

40:12We've got rich people with crypto. So we're going to let them spend their money and we're going to take a fee from that. There's this new kind of neobank narrative, which makes so much sense because crypto native people, you don't want to get back into freaking banks and all that stuff. It's too painful. So you just want to spend whatever you have, especially the stable coins, obviously. What do you see in the next maybe one or two years could be some, because for the moment you can spend your stable coins. It sounds stupid and it sounds simple, but it's so amazing. Like it's so amazing. It's amazing.

40:46Then the next thing is I can earn yield, right? I can get some cash back. Cool. I can earn yield on my stable coin that I'm holding there. What are other things that I or normal people might not be thinking of that could be integrated in those kinds of neobanks that could be a complete no brainer for someone who compares a Revolut or Monzo with an EtherFi or a CAST or a Plasma 1? I could stake my ETH with EtherFi and then obviously I'm earning 3-ish percent on that. I could take that staked ETH DeFi asset and I can borrow against it at a rate, whatever that is. Maybe it's just low single digit percentage point.

41:31So now I'm earning yield on my ETH. I'm long ETH versus Fiat, but I need to spend some Fiat. I need to go to 7-Eleven and buy a coffee or whatever it is. And now Etherfy will facilitate this loan against my staked Etherfy ETH and I can spend this fiat and obviously have to pay it back over time. But if I'm structurally bullish on ETH outperforming fiat and then I get this native yield in ETH while I'm spending, that's something that you can't do at a traditional Revolut or TransferWise or one of these other neobanks. Is it because it's too hard for them to make or is it because there's regulation that are trying to protect people?

42:09Because I know usually we're always complaining, saying, oh, this regulation, they're not protecting the people. Actually, they're making the normal people never able to kind of make it, right? But in the specific example of borrowing against your asset, especially with crypto assets that are very volatile, I kind of see a problem with that. Like, for example, in 2021, too, we had this entire CeFi thing, right? A lot of people got, I mean, obviously a lot of people lost all their money because the company were mismanaged. But even like a lot of people lost, because we have, before you said, we talk about perps and we talk about the gambling and hyper gambling society.

42:49So someone who has assets there and start to realize, I can't think of my girlfriend, for example, or ex-girlfriend. They're like, oh, amazing. I have this thing that goes up forever. but at the same time I can borrow and get some cash to pay for my holiday. Well, of course the lender will go down and then you will lose everything, right? Well, the lender is going to margin call you before they have to protect themselves, right? They're going to have require a certain minimum margin and whatnot. Of course you as a client could lose your shirt on this, but that's no different than any other borrowing and lending thing.

43:21We're just concerned. I'm concerned about, okay, does Etherify have good lending standards so that Etherify itself is not putting itself at risk? What the clients do is what the clients do. And if they have a responsible relationship with money, whether it's crypto or it's fiat, that's not going to change. You share quite a bit of your trading online. Most people probably see you as a trader, mostly a trader. What percentage of your portfolio or net worth do actually trade? Because often people think, oh, this is a trader, they just go all in, but like with trading, but that's not the way, that's not the case.

43:54Probably less than 5%. What assets do you feel comfortable buying and holding for the next five to 10 years? Nothing. Things change. How, how often do you kind of, are you like 24 seven thinking about this or do you like reassess every couple of months or just like, okay, now every six months I need to just sit down and say, okay, what's, what's changed? We're just always like connected. I love markets. I'm always reading and seeing, you know, what's changing in around the world. There's no timeframe. There's no, you need to do it every day, every month, whatever. Right. So this is what, this is my job.

44:29I love doing it. I love the markets. So I'm always reading stuff about financial markets and thinking about things for other people that, you know, might be, okay, I have a certain expense base. I know what my monthly costs are. I know how much I make. This is how much I want to save. So I'm going to invest in that particular way. And I don't want to be thinking about this every day, every month, every six months, whatever it is. Right. So I think it's a very personal decision. It's just, this is what I love to do. And so I have no problem reading Bloomberg or whatever, financial media or all the different podcasts and research that I read on markets and having a view and changing it all the time.

45:04Do you work with scenarios and say, okay, if this scenario is hit, I'm going to sell this or buy this or make this change? Or it's more like a gut feeling thing? I have no - Like you wake up, you're like, shit, now this thing can happen. I feel like in my gut that I need to do this change. switch this and I can be very fast doing that. So I do it. Yeah. I'm more of a gut person. I don't have a prescriptive strategy because I can't predict what the market's going to do. I have no idea. I can have an idea and then test my idea versus reality, but I don't try to say things. I have to do certain something in a certain way.

45:39I want to be very flexible. Are you happy? Yes. What makes you the most happy? Shredding powder.

45:49I mean this is the best kind of meditation to be honest like think about it you just go there you forget everything yeah if you think too much on the market you're going to die in an avalanche so yeah it'd be very pleasant have you ever been near like a very dangerous experience or something that happened on the slopes maybe a few years ago I was skiing in the backcountry and near the end of a run I think I was daydreaming a bit and then this massive crack appeared and I kind of had to like jump over it and like almost feel like a long jump so I didn't break my leg. That's probably the most danger I've been in in the backcountry, but I always go with certified guides and the number one is if you don't feel comfortable doing something, we don't do it.

46:31So we're not trying to, I'm not a professional skier. I mean, it's fun and I don't want to die doing it, but I'm not trying to take unnecessary risks. Have you ever been like saying, I'm not comfortable doing this thing? More the guide. It's like, we've seen. He's like, he's saying, no, we don't do that. Oh, I follow him. Let's go, let's go, let's go. No, no, no, no, no.

46:52Mostly in Japan? Mostly in Japan. Is it the best place to do so? Or is it the closest place to here to do so? And that's why you do it there. It's very consistent powder. It's very cold. So, you know, for the January to February time period, I find I like the conditions. It's not super duper steep, which can be a problem sometimes. if you want the steeper stuff, you maybe go to the Rockies and Canada, US, that sort of space. But I think for a consistency of snowpack, Niseko, Japan and Hokkaido is probably hard to beat. And I love Japan. I love the food. So I have king crab and go to the onsen after you ski.

47:33Living the life. if you compare to your early days how much happier do you feel now that you have a lot of money i think the money is a means to an end and the end is you know i'm able to spend three months of the year skiing i'm able to play tennis two hours a day i'm able to you know if i get injured rehab myself properly i'm not sitting in a chair for 10 hours a day if i don't want to right so So I think the aggregate amount of money is kind of irrelevant. It's what can I do with that in terms of my time and what I'd rather be doing. Is there a moment where you realize actually, because I think a lot of people, especially in this space, because you have this crazy amount of money made, lost, you realize for the basics, obviously money is very important.

48:18As you just said, like I can not do this thing or if I'm injured, I don't have to go to the government hospital and wait for five hours and in the middle of all these old people, like obviously, right? Or I can just go to Japan and go to ski and no problem. But is there a moment where you just realize, actually this thing kind of compared to what I thought is less exciting? Like I'm not deriving true meaning or happiness from that thing? Because especially young guys, right? We're all like, okay, I need to reach that number. I'll get there. And then it's going to be awesome. I'm going to be so happy.

48:52I'm going to change everything. And then you get there and you're like, actually, that's not it, right? Actually, that's not it at all. And then you get almost this wake-up moment where you're like, fuck, the whole thing I chased for that long is actually not the thing. I guess it depends on what you chased it for, right? If it's, I chased it because I was going to buy a Lamborghini. Okay, well, then you bought the Lamborghini. So what? Did you buy the Lamborghini? I have a Ferrari. How did you feel when you bought the Ferrari? It was fun. I mean, I'm not a big car guy. It was just something interesting to drive around.

49:21I don't really give a fuck about cars. I don't know anything about it. People ask me, what's your engine? I don't even know. I just bought the car how long did you feel after you bought because usually for cars people say it's like a couple of weeks right or a couple of months like you're super happy but then it becomes normality everything becomes normality that's why I'm big on sports the reason why I did this is not to buy a car or whatever to buy a nicer apartment it is nice to have a nicer apartment and more space and all those sorts of things but I love skiing and every day when I'm out in the mountain you know with a guy and my friends just shredding like this is what I did this all this for.

49:56Like, I don't care about anything else. Like if I live in a, if I could be a ski bum for the rest of my life, that's all it and I had no money. Cool. Whatever. Actually the cool thing with sport is, uh, the progress like, uh, in everything, right? Running, whatever, even gym. I started with a PT again after three years. Uh, I did macro counting on that stuff a few years ago, worked amazingly well. And then a few weeks ago, I was like, I've been training like five times a week for three years, but I'm doing, I'm doing bullshit here. Like it's nonsense. Right. also with all the planes and all that stuff.

50:25So I just started again. And then I realized if you do the proper way and you increase volume every training and after three or four weeks, you're like, holy shit, I'm lifting much more, like more reps, more weight, or heavier than three weeks ago. And it feels so much easier. And then you have this thing where like, fuck, like this is actually, it's so simple, right? It's just progress, but it feels so good. Yeah, I love it. I mean, lifting is great. Or any other sport like that, where you progress. That's the whole point. The journey is fun because you're getting better at whatever it is you decide to do, even if you're not a professional.

51:00What's the thing that you're holding on to but you know you should let go of?

51:12I don't know. No idea. You know me thinking too much. Yeah. Just go with the flow. So tell me one thing that you learned in the last 20 years that can take me with me for the next half of my life.

51:34Nothing you value will come unless you work hard at it, whatever that is. Can you give me some examples? So, I don't know. Going to the gym, right? If you lifted one weight and you look like Artus Schwarzenegger, then it wouldn't be fun. I don't really lift heavy weights anymore, but it's a lot of fun. Measuring yourself, seeing your progress, going up that one kilo, whatever, and maxing out. I think you're spending hours a day doing this thing. That's the fun part. If it was just like, okay, I stopped at the gym, I did one squat, I've got quads like Schwarzenegger or a back or whatever, I think then people wouldn't do it because it's not fun.

52:16I think the journey is fun. Now, not everything is that way. Everyone's different in terms of what journey is fun for them. You post all these things online on Twitter, for example, to skiing thing, then you go to Korea, all these things. Probably a lot of people say, I want this guy's life, right? And what I see is a lot of, this is X because it's crypto, but there's this Instagram generation, TikTok generation, where a lot of people actually feel kind of sad because they don't have what they want. But they also, because of, I don't know, all these things that they see, they kind of are not able to motivate themselves.

52:56They kind of feel stuck, right? They feel like they're stuck. What would you tell these people? I mean, they don't feel stuck. They want to get there, but they can't get to even start to doing something. They almost have this analysis by paralysis. So like, if I do this thing and I do it wrong, then I'm going to lose some time. Yeah, I think obviously social media is a highly curated environment. No one sees the amount of work that goes into all those images, whether it's the very beautiful person, what's their wake-up routine. Maybe they don't party, maybe they don't drink. There's a lot of things that they don't do to look that way in that particular moment on Instagram.

53:33Or a sportsman, oh wow, that guy's really jacked. Are you stretching every morning for an hour? Did you eat clean for the last 20 years of your life? to get that way, right? No one, this image didn't happen overnight, but at the end of the day, people enjoyed the progress, right? The, you know, what's the best way to run a mile? Run a foot first, right? It's just a slow progress and then you get to where you want to go. Amazing. Thank you, Arthur, for doing this. Thank you for having me. That was fun. Awesome. As you probably know by now, I host some of the biggest names in Bitcoin and crypto on my podcast, but a lot of the best stuff never makes it on air.

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