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First Mover Asia: Arthur Hayes Sees a 'Balkanization of Finance' Coming Soon as Crypto Rallies

First Mover Asia: Arthur Hayes Sees a 'Balkanization of Finance' Coming Soon as Crypto Rallies

First Mover Asia: Arthur Hayes Sees a 'Balkanization of Finance' Coming Soon as Crypto Rallies

ALSO: Asia-based traders push bitcoin past $30K.

ALSO: Asia-based traders push bitcoin past $30K.

ALSO: Asia-based traders push bitcoin past $30K.

AccessTimeIconApr 11, 2023, 3:39 AM
Updated Apr 11, 2023, 2:25 PM
(Rachel Sun/CoinDesk)

Good morning. Here’s what’s happening:

Prices: Bitcoin and ether are well within the green as they near highs not seen since the COVID-19-induced bull market.

Insights: For former BitMex CEO Arthur Hayes, traditional banking is broken and finance will never be the same.

Prices

1,279
+57.8 4.7%
$30,294
+1978.5 7.0%
$1,931
+76.4 4.1%
S&P 500
4,109.11
+4.1 0.1%
Gold
$2,011
+21.9 1.1%
Nikkei 225
27,633.66
+115.3 0.4%
BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC)
CoinDesk Market Index (CMI)
1,279 +57.8 4.7%
Bitcoin (BTC)
$30,294 +1978.5 7.0%
Ethereum (ETH)
$1,931 +76.4 4.1%
S&P 500
4,109.11 +4.1 0.1%
Gold
$2,011 +21.9 1.1%
Nikkei 225
27,633.66 +115.3 0.4%
BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC)

Bitcoin and ether are well within the green as the Asia business day begins, with bitcoin pushing past a yearly high of $30,000, and ether beginning to test $2,000.

Crypto-related stocks are also at year-long highs as the price of bitcoin surges.

While bitcoin's relationship to the current banking crisis has made it a clear winner over the last month, there are plenty of questions as to how the Ethereum network's Shanghai upgrade is going to impact the price of ether.

Is it what ether needs to surge ahead? Or, is ether just following bitcoin's gains?

Ether Capital CEO Brian Mosoff calls it a "non-event."

“My suspicion is that this is going to be a non-event in terms of price,” Mosoff told CoinDesk TV’s “First Mover” on Monday. “I expect you will see more ETH get locked into staking, either from solo stakers or, again, you’ll see more structured products come to market.”

There's also the fact that most of the staked ether is also being held at a loss, as CryptoQuant recently wrote in a report.

Meanwhile, the futures market is pricing in modest gains for ether on contracts that expire at the end of June.

New inflation data is scheduled to be released on April 12, which should show whether the Federal Reserve has tamed the beast, and that's always been bullish for crypto and risk assets.

Although some have said that there's a new safe-haven narrative forming around crypto, the data still shows a tight correlation between it and the S&P 500.

"We are likely to see continued accumulation from longer-term investors interested in its currency debasement hedge properties, while short-term moves are dictated by shifting theories about what monetary liquidity will do," Noelle Acheson, the author of the Crypto Is Macro Now newsletter, recently wrote.

Insights

Arthur Hayes Isn't Mincing Words About Banking

During the coldest days of 2022’s crypto winter, when the wreckage of the FTX exchange was still smoldering, VanEck forecast that bitcoin could drop to $10K-$12K by the first quarter of 2023.

"Bitcoin will test $10,000-$12,000 in Q1 amid a wave of miner bankruptcies, which will mark the low point of the crypto winter," Matthew Sigel, head of digital assets research at VanEck, wrote at the time.

In many ways VanEck was right about the pressure bitcoin has been under: Some miners have gone bankrupt, others are engaged in litigation with each other and mining-friendly Texas has passed legislation limiting the benefits available to the industry.

But VanEck was wrong about something major: the price of bitcoin.

2023 has been defined by being a mini-bull market. Year to date, bitcoin is up about 80%, currently just over $30K.

And that’s all in the face of the crypto-friendly banks Silvergate and Signature collapse.

"It's all driven by the collapsing of the Western banking system," Arthur Hayes said in a recent interview with CoinDesk. “The world is recognizing the entire Western banking system is bankrupt, and they’re all f—ed.”

Bitcoin's correlation with traditional assets is breaking as it serves as an asset outside the traditional fiat banking system, Hayes says, pointing to the S&P 500’s 7% gain year to date, versus bitcoin’s more than 80% increase.

And what does the Hayes portfolio look like as the Western banking system teeters?

Bitcoin, gold, property and maybe even some assets in RMB.

“I’m going to go into all these other things that are not connected to the banking system directly,” he said. “I want to own assets in Dubai and all these other regions that actually have a real economy other than just printing money.”

Hayes isn’t a total dollar doomer – his prediction is that it's still going to be in use with the U.S. and her allies, but it will no longer be the world’s reserve currency. The next decade will see the balkanization of currencies, with the dollar making up 40%-50% of trade (between 1999-2019 it accounted for 74% of Asia-Pacific trade, and 96% of trade in the Americas).

“The West will be a dollar block, and other non-aligned countries will use gold, Dirhams, CNY, rubles, whatever,” he said. “When you go to different places you’ll need to use a different currency, and everyone becomes an FX speculator more than they are today.”

What about the price of bitcoin?

In March, Balaji Srinivasan bet that bitcoin would be $1 million by June 17 on the back of hyperinflation and a failing banking system. On Twitter, he continues to double down on the prediction, although prediction markets are giving it a 99% chance of not happening.

Hayes doesn’t discount the possibility of bitcoin hitting $1 million, and has been a vocal supporter of Srinivasan on Twitter. But it might not happen for a while.

“I know it’s coming, and I think bitcoin just keeps climbing. Will it reach $70,000 this year? I doubt it,” he said. “In 2024 there will be the halving, and more banks that have gone bankrupt in the U.S. and Europe. You’ll probably also have a very explicit guarantee of all deposits in the Western world by central banks.”

At this point, Hayes argues, the market will know it needs to be in bitcoin, gold, ether, or other assets.

“Anything that isn’t stocks and government bonds,” he says.

How could you not be bullish on crypto?

Important events

8:30 a.m. HKT/SGT(00:30 UTC) Westpac Consumer Confidence (April)

9:30 a.m. HKT/SGT(1:30 UTC) China Consumer Price Index (YoY/March)

5:00 p.m. HKT/SGT(9:00 UTC) European Union Retail Sales (YoY/March)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Ethereum developers have started to refer to the blockchain’s upcoming hard fork – in this case, a key upgrade – as “Shapella.” Ether Capital CEO Brian Mosoff joined the conversation ahead of the two major Ethereum network upgrades expected to occur simultaneously on April 12. Plus, TRM Labs Head of Legal and Government Affairs Ari Redbord discussed the Treasury Department's first analysis of illicit finance risks associated with decentralized finance (DeFi).

Headlines

Winklevoss Twins Lent Their Crypto Platform Gemini $100M, Bloomberg: The brothers had tried to get outside investment, Bloomberg said.

Hong Kong’s Financial Secretary Declares Now Is the 'Right Time' for Web3 Adoption: Finance chief Paul Chan said in a blog post that despite recent volatility in crypto, now is the time to push forward Web3 technologies.

Euler Finance Community Weighs Plan to Return Money Recovered From $200M Hack: The goal of the proposal is to let Euler users redeem their funds as soon as possible.

Sushi DEX Recovers 100 Ether After Millions Lost on Weekend Exploit: "White hat" hackers are working to recover more of the stolen funds as of Monday.

AI-Focused Blockchain CryptoGPT Raises $10M Funding at $250M Valuation: CryptoGPT recently rolled out AI assistant "Alex" and is developing its ZK rollup layer 2 blockchain and a data-to-AI engine, which collects, encrypts and transfers data for commercial applications.

Disclosure

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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

James Rubin was CoinDesk's U.S. news editor based on the West Coast.