Article:
Arthur Hayes, known for his bold predictions, recently shared an essay titled “Time Signature,” where he outlines a broad macroeconomic theory. He suggests that a US credit surge, reminiscent of wartime, might lead to a massive bubble in Bitcoin and the broader crypto market.
On July 22, the BitMEX co-founder likened financial markets to dancers who must move in sync with the rhythm of credit creation. He warns, “Being off-beat means financial loss,” and highlights the current tempo: US wartime industrial policy, which he starkly refers to as a shift towards economic “fascism.”
Hayes bases his thesis on a recent Pentagon deal with MP Materials, where the US Defense Department will become the major shareholder, ensure a minimum price for critical rare-earth elements at twice the current market rate in China, and support a $1 billion loan for a Nevada processing facility. This framework, he argues, serves as a model for “QE 4 Poor People,” a credit-expansion strategy that increases the money supply without needing Congressional approval.
In his example, a single bank loan to MP Materials generates “$1,000 of new fiat currency,” which then spreads as wages, deposits, and cheaper Treasury borrowing. Hayes notes, “The money multiplier is greater than one, and this wartime production boosts economic activity, recorded as ‘growth.'” This leads to inevitable inflation, but also “guaranteed profits” for banks and industries, according to Hayes.
Why Crypto Might Become the Favored Bubble
Hayes draws parallels with China’s property boom from the 1990s to 2020s, where a massive M2 expansion forced people into real estate, inflating land values and benefiting local governments. In the US, he argues, digital assets will be the acceptable release valve.
Two policy changes support this view. Firstly, retirement plans, a market worth $8.7 trillion, can now invest in crypto via a recent executive order. Secondly, the Trump campaign’s proposal to remove capital gains tax on digital assets could, in Hayes’ words, trigger “insane war-driven credit growth” without taxes. Politically, he suggests, this move appeals to a younger, more diverse investor base, potentially garnering support for the ruling party’s economic agenda.
Even with credit-driven growth, someone must absorb the rising federal deficit. Hayes points to the stablecoin sector, which already heavily invests in US Treasury bills. He notes that about nine cents of every new dollar in crypto market value flows into stablecoins. “Assuming Trump boosts the total crypto market cap to $100 trillion by 2028,” he writes, “this could generate approximately $9 trillion in T-bill purchasing power.”
This mirrors World War II financing, where the Treasury focused on short-term bills. Hayes envisions a cycle: wartime procurement drives credit growth, increasing credit boosts crypto, larger crypto capitalization enhances stablecoin demand for T-bills, and these purchases support further deficits.
Investment Strategies and Year-End Predictions
In this macroeconomic landscape, Hayes announces that his fund, Maelstrom, is “fully invested,” explaining, “It’s straightforward: Maelstrom is fully invested. As risk-takers, the altcoin market offers great chances to outperform Bitcoin, the leading crypto asset. […] Ether was once the most underappreciated large-cap crypto. Not anymore; Western institutional investors, led by Tom Lee, are now embracing Ether. Buy first, ask questions later.”
Hayes is clear about his numerical targets: Bitcoin at $250,000 and Ether at $10,000 by December 31, 2025. He writes that the Western credit expansion is “about to disrupt the market significantly.” However, he repeatedly emphasizes that these are his personal views, not investment advice.
At the time of writing, Bitcoin was priced at $118,368.
