Source: Crypto Banter

Translation: Azuma, Odaily Planet Daily

Editor’s Note: The industry heavyweight and BitMEX co-founder Arthur Hayes, known for his market predictions, has shared his insights on potential interest rate cuts, ETH trends, and altcoin selections during a podcast discussion on Crypto Banter early this morning.

The following is the full content of Arthur Hayes' podcast discussion, translated by Odaily Planet Daily, with some content omitted for smoother reading.

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

Host: I saw some tweets you posted earlier, especially the one from August 2: "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…" Can you elaborate on your views regarding the market trends for the second half of the year? I think Powell must cut rates in September; he seems to be under immense pressure. What do you think?

Arthur Hayes: I don’t think Powell must do anything. I’ve discussed this with many macro strategists, and they’ve given various reasons. Of course, some will talk about the labor market; others will say the U.S. may already be in a recession or will soon be; some will say tariffs will disrupt everything… I understand all this noise, but humans are strange; at certain odd points, people suddenly decide to have "principles," to have "self-respect" and "face."

If Powell truly sees himself as "Volcker 2.0," what better way to prove himself than to withstand Trump’s pressure? For example, not cutting rates and sticking to his term until May 2026 instead of resigning early. This is entirely possible. In that case, we could see a situation where Powell overstays his term, combined with a bunch of Democratic appointees obstructing Trump’s policies. I don’t know the probability of this happening, but almost no one in the market has seriously considered it.

Of course, this doesn’t mean the Trump administration can’t find ways to "print money." If the government really wants to print money, it will always find a way. So I’m just warning of the risks; I can’t provide probabilities.

Clearly, I think we are entering a "gray area." Friday is the Jackson Hole summit, and Powell will speak. Everyone is looking forward to whether he will reveal his intentions for September: will he cut rates? Or will he say that rates are not yet tight, or even possibly higher? No one knows what he will say. The Treasury is still issuing debt, and the reverse repo balance has been zeroed out. The market opened weakly this week; for example, ETH dropped 10%, so I think this is an uncertain phase.

Will the market at the end of the year be higher than it is now? I believe it will. If you’re not leveraged, you really don’t need to care; maybe it will drop another 15%-20% this week, and if you have spare cash, this will be a good opportunity to buy the dip. I believe there will definitely be "money printing" before the end of the year. Bitcoin could surge to $250,000, and ETH could exceed $10,000. But before that, the fall may be quite volatile.

Host: I agree with most of your points, which aligns with our judgment. There may be a pullback before the end of the year, and then the real bull market climax. I will look at the data: CPI below expectations, PPI above expectations, employment data being revised… The market currently gives an 83% probability that rates will be cut. I think your point about Powell being a person of "principle" has some merit, but I still lean towards believing he will cut rates in September unless something unexpected happens.

Arthur Hayes: Why is cutting rates the "right choice"? The data from the U.S. Bureau of Labor Statistics (BLS) is garbage, completely manipulated by partisanship. CPI is also garbage; statistical models can be manipulated at will. After Trump took office, the BLS director was replaced, and this agency will eventually become his megaphone, so Powell can easily say, "These data are unclear; we need more time and will temporarily maintain rates at 4.5%."

I’m just reminding everyone from another angle: don’t pin your hopes on so-called "data." Back in 2022, everyone said the data pointed to a recession, and Powell had to cut rates, but he directly raised rates by 75 basis points, hitting the market hard. So we could very well replay the situation of 2022 — the market expects a rate cut, but Powell suddenly delivers a "hawkish punch," resulting in a market crash.

Host: Well, I think there will be at least a 25 basis point cut in September, even if it’s just because he’s fed up with 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 — to withstand the president’s overreach and maintain the independence of the Federal Reserve.

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

Arthur Hayes: My baseline judgment is — I have no idea. I won’t take a heavy position based on these false data points and get stuck. You can interpret these data 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 where "Powell stands firm on principles" and directly tells Trump, "Forget it," maintaining no rate cuts in an election year.

Do you remember when Kamala Harris was campaigning? The labor market was good, unemployment was low, inflation was above target, but the Federal Reserve still cut rates by 50 basis points to help her. There were even Federal Reserve officials who openly said, "The Federal Reserve will do everything possible to prevent Trump from being elected," although it wasn’t Powell who said it directly, but other board members made clear statements. So, a similar situation could arise now: the market calculates an 83% probability of a rate cut based on the data, but Powell might be thinking, "The Federal Reserve is above partisan politics, so we won’t cut rates."

I’m not saying this will definitely happen; I’m just reminding you that this is a possibility. Personally, I won’t trade based on the assumption of "the Federal Reserve cutting rates by 50 basis points." Because even if Powell doesn’t cut, the Trump administration has many other ways to stimulate the market. So there may be short-term pain, but this could instead push the Trump administration to use more aggressive and "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 method they will use, but I am very sure that if Powell insists on not cutting rates, the government will find a way to "squeeze out liquidity."

Short-term and Long-term Price Predictions for ETH

Host: Alright, you previously said ETH would test $3,000. Do you think ETH will reach $3,000 first and then break its historical high?

Arthur Hayes: I don’t think so. When I said ETH would test $3,000, it was before it broke $4,000. Later, Jane and I bought back some ETH. From a chart analysis perspective, it definitely has more room to rise; we can’t go against the market.

If Powell gives a hawkish speech at Jackson Hole, I think ETH might first retest $4,000.

Host: In this cycle, Bitcoin's price has exceeded its previous high by about 70%, while ETH is still struggling to break its previous high. Do you think ETH will experience a similar catch-up rally, rising above its previous high by 70%, reaching $5,000, $6,000, or even $7,000?

Arthur Hayes: I believe ETH will reach $10,000 – $20,000. Once it breaks its historical high, the upside potential will be completely opened up. Additionally, as digital asset treasury companies continue to raise funds, if the assets they purchase are constantly hitting new highs, the fundraising process will become easier, and prices will continue to push upward.

This mainly depends on how much funding these companies can raise and how much money the government will print. I’m not the type to rigidly adhere to a "four-year cycle." How long this cycle lasts depends on how they play it.

The Trump administration hasn’t fully entered the "money printing rhythm" yet. They are still laying the groundwork, testing various methods to see which one works. They are sending signals of "we want to heat up the economy," throwing out various ideas to see what can be implemented. Once the candidates for the Federal Reserve chair and board members are determined, such as whether Trump can fire Powell and install his own people — this may not become clear until mid-next year.

Once that is determined, for the remainder of the period from mid-2026 until the end of Trump’s term, they will print money like crazy. Because without printing money, you can’t win an election. The Democrats need to print money, and the Republicans have to print money too. Otherwise, how can his supporters and allies benefit and get re-elected?

Host: So you think this bull market could be extended for a long time. In other words, the traditional four-year cycle theory may fail. The Trump administration's money printing may have started a bit slow, but once the policies fully take effect, this cycle could extend to 2027 or 2028?

Arthur Hayes: Exactly.

Host: Wow, that’s really amazing. You’re saying ETH could reach $10,000–$20,000, not this year, but in the next three to four years, right?

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

The Democrats will also clearly shout "we need to print money," and if the Republicans don’t provide benefits, they will lose votes. So both sides will be eager to flood the market with liquidity.

Host: Haha, you’re almost making me want to vote for the Democrats. If they’re going to throw money around, I only care about the money anyway.

Arthur Hayes: Right, in the end, it’s all about money; partisanship doesn’t matter.

ETH vs SOL

Host: ETH has recently captured the big narrative on Wall Street, and everything seems like a perfect chain reaction. First, Circle went public, performing much better than expected, which shifted everyone's attention to stablecoins; then, the stablecoin narrative naturally fell onto ETH; next, Joseph Lubin and Tom Lee both loudly called for bullish positions on ETH; as a result, ETH has become the new darling of Wall Street. It has become the platform for "real-world assets." Moreover, ETH now has prominent leaders, whom I refer to as "Batman and Superman" — Lubin and Tom Lee, one speaking daily on CNBC with a microphone, and the other being a founding figure of ETH… 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 bearish on ETH, almost unanimously supporting SOL. Now it suddenly seems to be all about ETH.

Arthur Hayes: To be honest, both will rise. The question is just which one will rise more. I am an advisor for Solana projects, so I obviously believe SOL will rise, but ETH is a larger asset with faster capital inflow. SOL and ETH will be an interesting race; one may rise faster, but that doesn’t mean the other will lose; they will both go up.

Host: From a position allocation perspective, would you be more heavily weighted in ETH?

Arthur Hayes: Yes, I would lean more towards ETH.

Investment Logic and Collapse Risks of Crypto Treasury Companies

Host: The shift in Wall Street's attitude is indeed astonishing. What do you think about these "crypto treasury companies"? Some people are hesitant about whether to hold ETH directly or buy stocks of these companies, like SBET or BMR, which sometimes trade at 1.8 times or even 2 times their net asset value. Would you recommend crypto investors buy these stocks?

Arthur Hayes: The trading logic is 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 team at UPXI (a Solana treasury company), and I told them to study which indices might include their stocks, what mandatory buying rules fund managers have, and that average trading volume, market capitalization, and listing exchanges must meet certain standards.

As long as these conditions are met, fund managers must buy your stock, regardless of what the company is actually doing. This is the MicroStrategy model, pioneered by Michael Saylor. They force capital inflow by entering various indices.

Host: Doesn’t this create leverage risk in the market? For example, if you have $1 worth of ETH but it gets inflated to $2 in some companies, there’s $1 of "air" in between. In Michael Saylor's case, he initially used money from bonds and convertible bonds to buy Bitcoin, which could generate returns for shareholders while returning principal to bondholders. But now, most new treasury companies have learned the lesson; they all say, "We don’t want leverage," because Michael Saylor has proven that debt can be called back, while different categories of stocks won’t have this risk. So I’m confused as to why anyone 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 enter an index. Passive fund managers don’t care about the price or net value; if the system requires them to buy, they must buy. They must have all the stocks bought by the close of trading. Whether it’s $1 or $50,000, they don’t care.

Host: I understand, but I still think this is risky. For instance, if the market crashes one day, and these companies' stock prices drop from 2 times net value to below net value, no one will buy them anymore. At that point, they will lose their meaning of existence and can only sell off their underlying assets, leading to a "de-leveraging collapse" in the crypto market.

Arthur Hayes: (A collapse) is theoretically possible, but in practice, it’s not that easy. Because these are not ETFs; they are companies. If the company management wants to "tough it out," you must first buy enough shares, hold a shareholder meeting, and force them to liquidate. This process is very expensive and time-consuming, potentially taking years, and may involve lawsuits.

So I’m not too worried about the so-called "chain reaction collapse." Unlike ETFs, which can be redeemed 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 was trading at a 50% discount back in the day?

Arthur Hayes: Yes, but at that time, you would need a long time and significant costs to actually realize the arbitrage.

Host: What I worry about is that not every team is Michael Saylor. When some companies can’t hold on and start liquidating their crypto assets, that will be the end of this cycle.

Arthur Hayes: I agree. At that time, some treasury companies may be acquired at a discount to net value or directly liquidate their assets. The leading projects will passively absorb capital, while the laggards will be eliminated.

Host: Which assets do you think will catch Wall Street's eye and be worth establishing treasury companies? Clearly, BTC, ETJ, and SOL have potential. I’ve also seen treasury companies emerging around BNB, TON, HYPE, and ENA. How far do you think this trend will develop? Will it cover the top 100 tokens? Or just the top 20 tokens? How interested do you think Wall Street is in cryptocurrencies right now?

Arthur Hayes: As long as the market continues to rise — I don’t know how much the bankers specifically take from these trades, but it’s definitely fine for sponsors to take 3%, 4%, or 5% — this is a fantastic business for investment banks. As long as there’s profit to be made, they will build treasury companies for all assets.

Choosing and Logic of Altcoins

Host: Let’s talk about altcoins. The last time I saw you during Dubai 2049, you told me to buy ETHFI, and it ended up helping me buy a new house and pay for my child's tuition. So what altcoins are you looking at now? For example, Ethena (ENA), are you still optimistic about it? Their stablecoin issuance has doubled, from $6 billion to $12 billion, and as market rates rise, the protocol's yield has also recovered. It seems like this project has done a lot of things right.

Arthur Hayes: Yes. I have a macro logic regarding stablecoins, and I will be speaking at WebX in Japan next week, where I will also publish an article. My point is that people’s imagination about stablecoins is still not big enough. U.S. Treasury Secretary Yellen will use stablecoins to reverse the trend of "de-dollarization" — that is, to bring back the global offshore dollar flow to the U.S., while also providing banking services to so-called "global south countries" (mainly developing countries in Asia, Africa, and Latin America), even if local regulations do not allow it.

Stablecoin issuers need to make money from interest rate spreads, so they will use users' funds to buy U.S. Treasuries. Suppose by 2028, the circulation of dollar stablecoins reaches $10 trillion; what does that mean? I will elaborate on this part in my article.

Ethena's model is to package the "funding spread" in the crypto market into a self-yielding stablecoin. Essentially, you are lending money to speculators (those going long) and earning returns. This trading model has existed in the crypto market for over a decade; it’s just that the Ethena team has packaged it as a DeFi product, making it easy for everyone to participate.

So I believe Ethena can earn hundreds of millions of dollars in interest income through this path each year. Once they start buying back tokens and ETH is surging, the price of ENA will definitely skyrocket. My prediction is that Ethena will surpass Circle in the next 12 months, becoming the second-largest stablecoin after Tether.

Host: That’s a bold prediction, and I agree with your analysis. Let me ask you this: in reality, there will be a bunch of stablecoins, like PayPal USD, USDT, USDC, Ethena, and Stripe's stablecoin. Why would people keep exchanging them? In what scenarios would you exchange USDT for USDC or PayPal USD?

Arthur Hayes: The key is not the exchange but the distribution. Social media platforms are the "tip of the spear"; who will open accounts for those who haven’t interacted with dollars yet? The answer is Facebook (Meta) and X (Musk's Twitter), as they will launch wallets. At that point, which stablecoin gets chosen will depend on the distribution capabilities of these platforms.

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

Arthur Hayes: The Telegram chain seems a bit fake to me, with little real activity and legal troubles. I don’t think the U.S. government will hand over the distribution rights of "dollar policy" to Telegram. It’s more likely to be given to capitalists like Musk and Zuckerberg, who pay taxes, donate, and are controlled.

For example, Filipinos want to use dollars, but local regulations prevent Citibank and JPMorgan from serving them directly. The Trump administration could support WhatsApp in launching "USDT payments," allowing Filipinos to receive dollar remittances directly through WhatsApp. This kind of "dollarization" cannot be stopped.

Once everyone has stablecoins, the next step is to spend them. For instance, buying coffee at 7-11 or swiping cards at convenience stores; domestic bank cards may not work well overseas, but Ether.fi is very useful. I have the Etherfi app on my iPhone and a physical card, which I can swipe anywhere. Once hundreds of millions or even billions of people get dollar stablecoins through Facebook and X, they will also need spending scenarios. Ether.fi can meet this demand by allowing stablecoins to be spent.

Host: Alright, what about Hyperliquid? What’s your logic there?

Arthur Hayes: I believe Hyperliquid will become the largest exchange in the world, surpassing Binance. Because once stablecoins become widespread, a large number of new users will enter, and their only way to combat inflation will be through speculation, with on-chain derivatives exchanges being the trading venues. Hyperliquid offers low-cost, high-liquidity contracts and uses 97% of its profits to buy back tokens, directly benefiting users.

For example, when a project is about to launch, it usually has to pay 7%-10% of its tokens to centralized exchanges (like Binance) as a listing fee, but on Hyperliquid, it costs almost nothing and provides immediate liquidity. This way, project teams have no need to "give away" tokens to centralized exchanges. Consequently, Hyperliquid will gradually dominate the new issuance market.

Host: I understand. In the past, I would invest in smaller altcoins for higher returns, but this time I’m choosing to focus on leading projects like ENA and LINK, and then adding a bit of leverage. I feel this offers a better risk-reward ratio.

Arthur Hayes: Yes, I am currently only investing in projects that can generate real cash flow. I no longer pursue thousand-fold returns because that means dealing with a bunch of projects that could go to zero. I just want to hold onto my investments comfortably after significant capital comes in. For example, Hyperliquid is using 97% of its profits to buy back tokens, EtherFi has already started buybacks, and Ethena will soon initiate theirs as well. The profits from these protocols will be directly distributed to us token holders, rather than being intercepted by the protocol teams.

Host: I agree with your logic. What about Chainlink? Recently, it has also suddenly become a new darling of Wall Street. Is it on your radar?

Arthur Hayes: To be honest, I haven't been paying much attention. I haven't delved deeply into the oracle space, and I'm not quite sure if their current positioning is still just focused on being an oracle.

NFTs and CryptoPunks

Host: Alright, before I let you go, I have to tell you that I finally bought a CryptoPunk. Even though I previously said, "I will never buy one," that day you and Raoul Pal were both saying that CryptoPunks would outperform ETH, and I couldn't resist buying one. Do you still have a positive outlook on it?

Arthur Hayes: Absolutely. Because everything humans do, aside from survival essentials, is an "identity game." In reality, symbols of identity are artworks, luxury cars, and big houses; online, symbols of identity are these scarce, story-rich digital collectibles. CryptoPunks is the most representative NFT project, and its status is irreplaceable. So I must hold onto CryptoPunks; it will always be the "first," and CryptoPunks has great liquidity, being the most marketable series in NFTs.

When ETH rises to $20,000, many wealthy individuals will need to flaunt their identities. They might not show off designer belts but will say, "Look, I have a CryptoPunk, a pixelated avatar I bought for millions." This is the new symbol of identity.

……

The following content consists of personal life discussions and small talk, which will not be translated. If interested, you can directly watch the original video.

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