Arthur Hayes on Why AI Agents Will Want to Transact in Units of Compute

**Arthur Hayes** (0:00)
Just print more money and make sure it doesn't blow up. And so that's how Bitcoin moons, because they will print money to cover up this capital misallocation. And that's essentially the thesis of the essay.

**Laura Shin** (0:10)
Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. Before we dive in, we'll take a quick word from the sponsors who make the show possible.
This episode is brought to you by Oneinch Aqua, the shared liquidity layer from Oneinch. Back multiple liquidity positions with one wallet balance, and keep your tokens in your wallet until a swap fills. See how it works at oneinch.com/aqua.
Today's guest is Arthur Hayes, CEO of Flop Labs and CIO of Maelstrom. Welcome, Arthur.

**Arthur Hayes** (0:43)
Thanks for having me again.

**Laura Shin** (0:45)
Just a heads up, everyone, that this is actually a prerecorded interview with Arthur, but it was recorded just one day before release. Arthur, we scheduled this interview a while ago, but it's rather fortuitous that today, Wednesday, August 19th, Bitcoin is up almost 7 percent, its biggest jump in a day since March. We saw $1.44 billion worth of shorts liquidated. ETH has surged almost 16 percent. Hype has rocketed up almost 20 percent.
While we could maybe attribute it to the SEC's crypto rulemaking, I don't think that move markets because I saw so many tweets afterward being like, why aren't the markets moving? This is sign what a deep bear market this is, blah, blah, blah. It looks like it really was Treasury announcing that it will double long-end buybacks.
I think you have been writing about this. But yeah, go ahead and give me your take and explain why you think this is bullish for crypto, or if you think it is.

**Arthur Hayes** (1:45)
At the end, I have been banging on this liquidity dream. It's my only trade really at the end of the day.
I think the new nomenclature now for the hedge fund bros is debt sustainability DSA. That's the acronym being bandied around across the street. But at the end of the day, we had this idea that around 5 percent yield on the 10-year is the maximum paying point for the US Treasury.
It doesn't matter who is in the seat.
The paying point was evident with bad girl Yellen in the previous US presidential administration. It's evident with Buffalo Bill Besson in the current Trump administration. It seems like the 5 percent level, when it looks like the yields are surging towards that level, they engage in some money printing exercise in a form of what we call soft yield curve control. Yield curve control is when a central banker finance ministry essentially will print money in unlimited quantities to buy bonds until the yield cap is reached. Obviously, 5 percent yield in the 10 year was not reached. But this action, I think, is meant to scare the market to say, yes, 5 percent is the level. We care about it. We'll defend it. Don't test us.
So what it best to do, he said, I'm going to buy the long end, but I'm going to fund it by issuing bills. And so if you looked at the most recent quarterly refunding announcement by the Treasury, you'll see that the amount of bills issued continues to increase. There was talk about limiting the amount of long end issuance of debt. And this fits in with the Fed policy, because by all measures, Warsh and the Fed should have hiked rates in July meeting. The two-year yields about 50 to 60 basis points above effective Fed funds, which the market is saying yields are too low given the US economy. But he did not, because I have argued many times that he's working in concert with Besson in the same way that Powell worked in concert with Janet Yellen. And he will make sure that the short end is cheap relative to inflation, relative to growth, so that the Treasury can issue bonds at the short end, and perform a sort of operation twist and buy them back on the long end. And so yes, there's not a net increase in the amount of like dollars sloshing around, but you can sort of see this as a cap on long end yields, which, you know, eventually this won't work, and they'll have to return to outright expansion of the balance sheet. But this tells us the path of travel, and this is why Bitcoin and crypto woke up overnight.

**Laura Shin** (4:25)
And so what do you make of the moves of some of the specific coins? In particular, I wanted to ask you about the fact that you called for ETH to hit 5K by year's end. Even with today's bump, it's only at 2,200. So I wondered if you're sticking to the timeline or just if you have new views on kind of like, which tokens you expect to perform well.