Original Title: Powell Is About To F*CK Crypto Over At Jackson Hole! [Arthur Hayes]

Original Source: Crypto Banter
Original Translation: Odaily Planet Daily

Editor's Note: Arthur Hayes, a well-known figure in the industry who loves to predict market trends and co-founder of BitMEX, has once again made predictions about the market. During a podcast discussion with Crypto Banter earlier today, Arthur Hayes shared his insights on topics such as possible rate cuts, ETH trends, and altcoin choices.

The following is the full transcript of Arthur Hayes' podcast discussion, translated by Odaily Planet Daily. For the sake of readability, some content has been edited for brevity.

Powell and Rate Cuts, and the Market Trend for the Second Half of the Year

Host: I saw some of your previous tweets, especially the one on August 2nd: "The tariff bill will take effect in the third quarter, and at least the market believes that no major economy can quickly create enough credit to boost nominal GDP—Bitcoin will test $100,000, and Ethereum will test $3,000..." Please explain in detail your view on the market trend for the second half of the year. I think Powell must cut rates in September; he's now like he's a gun to his head. What do you think?

Arthur Hayes: I don't think Powell has to do anything. I've discussed with many macro strategists, and they have given various reasons. Of course, some would say the situation in the labor market; some would say the US may already be in a recession, or will soon be in a recession; some would say tariffs will disrupt everything... I understand this noise, but humans are strange. At some strange moments, people suddenly decide they must have "principles," "dignity," and "face."

If Powell really thinks he's "Volcker 2.0," what could prove this better than resisting Trump's pressure? For example, not cutting rates, insisting on serving until May 2026 before stepping down early. This is entirely possible. In that case, a situation might arise where Powell overstays his term, along with a bunch of Democratic-appointed governors obstructing Trump's policies. I don't know the probability of this scenario, but almost no one in the market has seriously considered it.

Of course, this doesn't mean the Trump administration can't find a way to "print money." If the government really wants to print money, they will always find a way. So I'm just warning about the risks and can't provide a probability.

Clearly, I believe we are entering a "gray area." Friday is the Jackson Hole Summit, and Powell is set to speak. Everyone is waiting to see if he will reveal the September direction: will there be a rate cut? Or will he indicate that rates are not tight enough, possibly even going higher? No one knows what he will say. The Treasury is still issuing debt, and the reverse repo balance has been cleared to zero. The market opened this week a bit weak, with ETH dropping by 10%, so I think this is an uncertain phase.

Will the year-end market be higher than it is now? I think it will be. If you are not leveraged, you really shouldn't care at all. Perhaps there will be another 15%-20% drop this week. If you have some cash on hand, this will be a good buying opportunity. I believe there will definitely be "money printing" before the year-end. Bitcoin could skyrocket to $250,000, and ETH could be above $10,000. But before that, the fall may be quite volatile.

Host: I agree with most of your points, which also align with our assessment. There may be a pullback before the end of the year, followed by the real peak of the bull market. I will look at the data; CPI is lower than expected, PPI is higher than expected, employment data has been revised... The market now gives an 83% probability that rates will be cut. I think what you said about Powell being a person of "principle" makes sense to a certain extent, but I still tend to believe that he will cut rates in September unless something unexpected happens.

Arthur Hayes: Why is a rate cut the "right choice"? The data from the US Bureau of Labor Statistics (BLS) is garbage, completely manipulated by partisanship. CPI is also garbage; statistical models can be manipulated at will. The BLS commissioner has been replaced since Trump took office, and this agency will sooner or later become his mouthpiece, so Powell could easily say, "This data is unclear, we need more time, and we will temporarily maintain the rate at 4.5%."

I'm just reminding everyone from another perspective: don't rely on the so-called "data." In 2022, everyone also said the data pointed to a recession, and Powell had to cut rates, but he directly raised rates by 75 basis points, severely hitting the market. So, we could totally replay the situation of 2022—the market expects a rate cut, but Powell suddenly delivers a "hawkish blow," causing a market crash.

Host: Well, I think there will be at least a 25 basis point rate cut in September, if only because he's tired of external criticism.

Arthur Hayes: Are you sure? If he really wants to be "Volcker 2.0," then this is precisely the opportunity to prove himself—resist the president's overreach and insist on maintaining the Fed's independence.

Host: So what is your baseline judgment? Do you think there will be no rate cut this year? Or one cut, two cuts? What is your baseline prediction?

Arthur Hayes: My baseline judgment is—I have absolutely no idea. I will not go all-in based on these false data points, trapping myself. You can interpret these data points from different angles, but they are all unreliable. I just feel that the market is expecting Powell to cut rates, but no one is seriously considering the scenario of "Powell sticking to his principles" and directly telling Trump to "go to hell," staying rate steady in the election year.

Do you remember when Harris was running? The labor market was strong, low unemployment, inflation was high, but the Fed still cut rates by 50 basis points to help her. There were even Fed officials openly saying, "The Fed has to do everything in its power to stop Trump from being elected," although it was not said by Powell himself, but other board members have made it clear. So, a similar situation may arise now: the market calculates an 83% rate cut probability based on data, but Powell might be thinking, "The Fed is above partisan politics, so we won't cut rates."

I'm not saying this will definitely happen, I'm just pointing out a possibility. I personally would not trade based on the assumption of a "Fed 50 basis point rate cut." Because even if Powell doesn't cut, the Trump administration has many other ways to stimulate the market. So, there may be some short-term pain, but this will instead prompt the Trump administration to use more aggressive, more "unconventional" means to print money and advance their economic agenda.

Host: So your baseline judgment is: they will definitely find a way to "print money" before the end of the year?

Arthur Hayes: Exactly. They will definitely do something. I don't know exactly what means they will use, but I am very certain that if Powell insists on not cutting rates, the government will definitely find a way to "squeeze out liquidity."

Short-term and Long-term Price Prediction for ETH

Host: Alright, so you previously mentioned that ETH will test $3000. Do you think ETH will first reach $3000 before surpassing its all-time high?

Arthur Hayes: I don't think so. When I said ETH would test $3000, it was before it broke $4000, and later Jane and I bought back some ETH. From a chart analysis perspective, it definitely still has room to rise, and we shouldn't go against the market.

If Powell Gives a Hawkish Speech at Jackson Hole, I Think ETH Might Retest $4000 First.

Host: In this cycle, Bitcoin's price has exceeded its previous high by about 70%, while ETH is still struggling to break above its previous high. Do you think ETH will experience a similar catch-up rally, such as also rising about 70% above its previous high to reach $5000, $6000, or even $7000?

Arthur Hayes: I think ETH will reach $10,000 – $20,000. Once it breaks its all-time high, the upside potential is fully unlocked. Additionally, with digital asset treasuries companies continuously fundraising, if the assets they've purchased are continually hitting new highs, the fundraising process will become easier, pushing the price further up.

This mainly depends on how much funding these companies can raise, and how much money the government is going to print. I'm not one of those who strictly follow the "four-year cycle." The duration of this cycle depends on how they play the game.

The Trump administration hasn't fully entered the "money printing rhythm" yet. They are still laying the groundwork, testing various methods to see what works. They are sending out signals of "we want to heat up the economy," throwing out different ideas to see what will materialize. Once the selection of the Fed chair and board members is confirmed, like whether Trump can fire Powell and appoint his own person—this may not be clear until mid-next year.

Once that is certain, from the middle of 2026 until the end of Trump's term, they will go crazy printing money. Because without printing money, you won't win the election. Both the Democrats and the Republicans have to print money. Otherwise, how can they get re-elected if their supporters and allies don't benefit?

Host: So you think this bull market cycle might be drawn out for a long time. In other words, the traditional four-year cycle theory may fail. Trump's money-printing launch is a bit slow, but when the policy is fully implemented, this cycle may extend until 2027 or 2028?

Arthur Hayes: Exactly.

Host: Wow, that's really amazing. When you say ETH can reach $10,000–$20,000, you mean not this year, but in the next three to four years, right?

Arthur Hayes: Yes. But my baseline judgment is, we will definitely have a big bull market cycle, and all financial assets linked to Trump's policies will benefit. Because he must win the 2026 election. The only thing voters care about is their wallets, whether they are richer today than yesterday. If not, they'll vote for someone else. So they chose Trump over Biden, and the logic will apply to the 2026 congressional elections and the 2028 presidential elections.

The Democratic Party is also unambiguous about "printing money," and the Republican Party would lose votes if it does not provide welfare. So both sides will do everything they can to stimulate the economy.

Host: Haha, you're almost making me want to vote for the Democratic Party. If they are going to give out money, well, I only care about money anyway.

Arthur Hayes: Yes, in the end, it's all about money; party affiliation doesn't matter.

ETH vs SOL

Host: ETH has recently captured the Wall Street narrative, and everything seems like a perfect chain reaction. First, there was Circle's listing, which was much better than expected, shifting everyone's focus to stablecoins; then, the stablecoin narrative naturally fell onto ETH; next, Joseph Lubin and Tom Lee both publicly expressed their bullish views on ETH; as a result, ETH became Wall Street's new favorite. It became the platform for "real-world assets." And now ETH also has prominent figures; I call them "Batman and Superman" — Lubin and Tom Lee, one appearing on CNBC every day, and the other being an ETH founding figure... My question is: If you could only put your money into one asset from now until the end of this cycle, would you choose SOL or ETH? Because until two months ago, everyone was still bearish on ETH, with almost unanimous support for SOL. Suddenly, ETH has become dominant again."

Arthur Hayes: To be honest, both of these will rise. The question is which one will rise more. I am a project advisor for Solana, so I naturally believe SOL will rise, but ETH is a larger asset, with funds pouring in more quickly. SOL and ETH will engage in an interesting race; one might rise faster, but it doesn't mean the other will lose; they will both rise.

Host: From a portfolio allocation perspective, would you be more heavily invested in ETH?

Arthur Hayes: Yes, I would have a heavier weight on ETH.

Investment Logic of Crypto Treasury Companies and Collapse Risk

Host: The transformation of Wall Street's attitude is indeed astonishing. What do you think about these "crypto treasury companies"? Some people hesitate between directly holding ETH or buying stocks of these companies, such as SBET or BMR, which sometimes trade at 1.8 to 2 times their net asset value. Would you recommend crypto investors to buy these stocks?

Arthur Hayes: The trading logic here is very simple. You are essentially spending $2 to buy $1 worth of assets because you believe in the power of passive index funds. For example, I just had a meeting with the UPXI team (a Solana treasury company) and I told them to research which indices might include their stock. Fund managers have certain mandatory buy-in rules based on criteria such as average trading volume, market capitalization, and listing exchanges.

As long as these criteria are met, the fund manager must buy your stock, regardless of what the company is actually doing. This is the MicroStrategy model, pioneered by Michael Saylor. They enter various indices to force fund inflows.

Host: Doesn't this create leverage risk in the market? For example, you have $1 worth of ETH, but it's being traded at $2 in certain companies. This creates $1 of "air." In Michael Saylor's case, he initially used bond and convertible bond money to buy Bitcoin, which could generate returns for shareholders while repaying the principal to bondholders. However, most of today's new generation treasury companies have learned from this. They all say, "We don't want leverage," because Michael Saylor has proven that debts will be called in, while different classes of stock won't have this risk. So now, I'm confused as to why one would spend $2 to buy $1 worth of assets. I find it hard to find a reasonable explanation.

Arthur Hayes: The answer is simple: because you believe it will be included in an index. Passive fund managers don't care about price or net asset value; the system requires them to buy, so they must buy. They need to have all the stocks bought by the close. Whether it's $1 or $50,000, they don't care.

Host: I understand, but I still think there is risk in this approach. For instance, if one day the market crashes and the stock prices of these companies drop from 2x NAV to below NAV, no one will buy them anymore. At that point, they will lose their relevance and can only sell off the underlying assets, triggering a round of "deleveraging collapse" in the crypto market.

Arthur Hayes: (Collapse) Theoretically, this is possible, but in reality, it's not that easy. Because these are not ETFs; they are companies. If the company management wants to be tough, you have to first buy enough shares, convene a shareholder meeting, and force a liquidation. This process is expensive, time-consuming, could take several years, and may involve lawsuits.

So I'm not too worried about the so-called "cascade failure." Unlike ETFs, which can be redeemed on the same day, treasury companies are more complex.

Host: But do you agree that by the end of this cycle, there will be many opportunities to buy these companies at very low prices, just like when Grayscale traded at a 50% discount.

Arthur Hayes: Yes, but it will take a long time and significant costs to truly arbitrage that.

Host: My concern is that not every team is Michael Saylor. When some companies can't hold out and start liquidating and selling off their crypto assets, that will mark the end of this cycle.

Arthur Hayes: I agree. By then, some treasury companies may be acquired at a net asset value discount or have their assets liquidated. The top projects will passively absorb capital, while the laggards will be eliminated.

Host: Which assets do you think will catch Wall Street's eye and deserve them to set up treasury companies? Obviously, BTC, ETH, SOL all have potential. I also see treasury companies around BNB, TON, HYPE, ENA. How far do you think this trend will develop? Cover the top 100 tokens? Or the top 20 tokens? How interested do you think Wall Street is in cryptocurrency right now?

Arthur Hayes: As long as the market keeps going up—I don't know how much bankers specifically skim off these trades, but the underwriters taking 3%, 4%, or 5% will definitely not be a problem—it's a great business for investment banks. As long as it's profitable, they will build treasury companies for all assets.

The Choice and Logic of Shitcoins

Host: Let's talk about shitcoins. The last time I saw you during Dubai 2049, you told me to buy ETHFI, and ETHFI ended up buying me a new house and paying for my child's education. So, what shitcoins are you looking at now? For example, Ethena (ENA), are you still very bullish on it? Their stablecoin issuance has doubled from 60 billion to 120 billion, and with the rise in market rates, the protocol yield has also rebounded. It feels like this project has done a lot of things right.

Arthur Hayes: Yes. I have a macro thesis on stablecoins. I will give a speech at WebX Japan next week and will also publish an article. My view is that people's imagination of stablecoins is not big enough. U.S. Treasury Secretary Benson will use stablecoins to reverse the "de-dollarization" trend—bringing back the global offshore dollar flows to the U.S. and providing banking services to so-called "Global South" countries, even if local regulations do not allow.

The stablecoin issuer needs to make money through the interest rate spread, so they will use users' funds to buy U.S. Treasury bonds. Suppose that by 2028, the circulation of USD stablecoins will reach $100 trillion, what does that mean? I will elaborate on this part in the article.

Ethena's model is to package the "interest rate spread" in the crypto market into a stablecoin with inherent returns. Essentially, you are lending money to speculators (longs) and earning returns. This trading model has been around in the crypto market for over a decade, but the Ethena team has packaged it into a DeFi product, making it accessible to everyone.

So, I believe Ethena can earn hundreds of millions of dollars in interest income annually through this path. When they start repurchasing tokens, and if ETH is skyrocketing again, then ENA's price will definitely soar. My prediction is that Ethena will surpass Circle in the next 12 months and become the second-largest stablecoin after Tether.

Host: That's a very bold prediction. Listening to your analysis, I also agree with it. So, I'll ask again, in reality, there will be a bunch of stablecoins, such as PayPal USD, USDT, USDC, Ethena, and Stripe's stablecoin. Why would people switch back and forth? Under what circumstances would you convert USDT to USDC, or convert it to PayPal USD?

Arthur Hayes: Actually, the key is not conversion but distribution. Social media platforms are the "tip of the spear," who will onboard those who have not yet touched the dollar? The answer is Facebook (Meta) and X (Elon Musk's Twitter), they will launch wallets. At that time, the selection of which stablecoin will depend on the distribution capabilities of these platforms.

Host: You didn't mention Telegram? It has 1 billion users.

Arthur Hayes: In my opinion, Telegram's blockchain seems a bit fake to me, with little real activity and legal troubles. I don't think the U.S. government would hand over the "dollar hegemony" distribution rights to Telegram. It's more likely to be handed to "American capitalists" like Musk and Zuckerberg, who pay taxes, donate, and are controlled.

For example, Filipinos really want to use the dollar, but local regulations prevent Citibank and JPMorgan from directly serving them. In that case, the Trump administration could support WhatsApp in launching "USDT payments," allowing Filipinos to receive dollar remittances directly through WhatsApp. This kind of "dollarization" is unstoppable.

When everyone has stablecoins, the next step is spending. For example, buying coffee at 7-11 or swiping a card at a convenience store. Domestic bank cards may not work well overseas, but Ether.fi works great. I have the Etherfi app on my iPhone with a physical card, so I can swipe it anywhere. When billions or tens of billions of people in the future receive a dollar stablecoin via Facebook and X, they will also need consumption scenarios. Ether.fi can meet this demand and spend the stablecoin.

Host: Okay, what about Hyperliquid? What's your logic?

Arthur Hayes: I believe Hyperliquid will become the world's largest trading platform, surpassing Binance. Because as stablecoins become popular, a large number of new users will enter, and their only way to fight inflation is through speculation, with on-chain derivatives trading platforms being the place for speculation. Hyperliquid offers low-cost, high-liquidity contracts and buys back 97% of the profits in tokens, directly rewarding users.

For example, when a project is about to launch, it usually has to pay out 7%-10% of tokens to a centralized exchange (like Binance) as listing fees, but on Hyperliquid, there is almost no cost, and immediate liquidity can be obtained. This way, the project team has no need to "give away" tokens to centralized exchanges. As a result, Hyperliquid will gradually dominate the new issuance market.

Host: I understand. In the past, to earn more returns, I would invest in some very small-scale altcoins, but this time, I chose to focus on flagship projects like ENA and LINK, then add a little leverage. I think this way, the risk-reward ratio is better.

Arthur Hayes: Yeah, I now only invest in projects that can provide actual cash flow. I no longer chase thousand-fold returns because that would mean enduring a bunch of projects going to zero. I just want to be able to hold comfortably after major capital comes in. For example, Hyperliquid buys back 97% of the profits in tokens, EtherFi has already started buybacks, and Ethena will also launch soon. The profits from these protocols will be directly distributed to us token holders, rather than being withheld by the protocol team.

Host: I agree with your logic. What about Chainlink? Recently, it has also suddenly become Wall Street's new darling. Is it within your focus?

Arthur Hayes: To be honest, not really focused on that. I haven't delved deep into the oracle part, and I'm not sure if their current positioning is still just as an oracle provider.

NFT and CryptoPunks

Host: Alright, before I let you go, I have to tell you that I finally bought a CryptoPunk, even though I said before "I will never buy one." But that day, when you and Raoul Pal were both talking about how CryptoPunks would outperform ETH, I couldn't resist buying one. Are you still very bullish on it?

Arthur Hayes: Absolutely. Because apart from necessities, everything humans do is a "status game," where real-world status symbols are artworks, luxury cars, big houses; online status symbols are these scarce, story-rich digital collectibles. CryptoPunks is the most iconic NFT project, and its status is irreplaceable. So I must hold CryptoPunks; it will always be the "first," and CryptoPunks have very good liquidity, being the most marketable series in NFTs.

When ETH reaches $20,000, there will be many wealthy people needing to show off their status. They may not show off a designer belt but say, "Look, I have a CryptoPunk, spent millions on a pixelated avatar." This is the new status symbol.

...

Subsequent content consists of personal life discussions and pleasantries, which I won't translate here. If interested, you can directly watch the original video.

Original Article Link

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia