Original title: No Trade Zone
Original by Arthur Hayes
Photo by Peggy Block Beats

THE EDITOR PRESSES THAT THE CURRENT MARKET IS NOT "UNDEFINED" BUT HAS ENTERED AN "UNTRADABLE AREA" CREATED BY AI DEFLATION SHOCK + GEOPOLITICAL SHOCK, AND THAT THE TRUE PERFORMANCE OF BITCOIN DEPENDS ON WHEN THE MONEY SUPPLY EXPANDS PASSIVELY AGAIN。

ON THE ONE HAND, AI IS RESHAPING THE LABOUR FORCE STRUCTURE, ERODING THE INCOME AND CREDIT CAPACITY OF KNOWLEDGE WORKERS, AND CHANNELLING DEFLATION SHOCKS TO THE FINANCIAL SYSTEM; ON THE OTHER HAND, ENERGY CONFLICTS AND GEOMETEOROLOGICAL GAMES HAVE FORCED COUNTRIES TO INCREASE FISCAL SPENDING, HOARD RESOURCES AND MAINTAIN OPERATIONS THROUGH BANKNOTE PRINTING. THE RISE IN INTEREST RATES COEXISTED WITH THE EXPANSION OF THE MONEY SUPPLY, RESULTING IN A SHARP FRAGMENTATION OF RISK ASSETS。

The deeper changes lie in the monetary system itself. Reconstruction around energy corridors and clearing paths has eased the cycle of “dollar-assets” and the gold and renminbi have been passively entering trade settlements on the edges. This structural change has not yet been agreed, but its marginal acceleration is sufficient to affect market expectations。

In such an environment, Bitcoin is no longer an asset under a single logic. It was under pressure both to deleverage and liquidity contraction and to benefit from expectations of monetary expansion and credit rebuilding. As a result, price performance appears to be contradictory, reflecting a combination of two systems。

Instead of rushing in the direction, the author Arthur Hayes prefers to wait for a signal that when volatility is really out of control and liquidity is forced to be released, the market will re-enter the tradable stage. Until then, it was more like an area where restraint was needed。

This is the point of departure: in a world where both deflation and currency printing are occurring, markets may be experiencing a rare “no-trade zone”。

The following is the original text:

Because Maelstrom had little business in the first quarter, some of our brokers came from time to time to ask me about the market and whether they could do something for us. My usual response is "no-trade zone."

With the exception of slow silos, Hyperliquid, we haven't done much business all quarter。

there are two factors that add up to create a "dead zone" for a deal, at least for our long-only position。

First of all, there is the rapid proliferation of AI, which has the ability to act autonomously. Such technologies will destroy the career prospects of ordinary knowledge workers in the “flexible jobs” structure of developed Western economies (mainly within the “United States order”, the Pax Americana system). It will be followed by a deflationary financial collapse. This has been discussed in detail in my previous article, The Is Fine。

Second, after the article was published, the President of the United States, Donald J. Trump, the "Royal Emperor/Chief Performer" took the initiative to wage war against Iran in order to turn Iran into the newest "Trashcanistan", with the support of his bellicose "songwriter" and Israeli Prime Minister Benjamin Netanyahu (the "Bedoun Butcher."。

The war has been going on for almost seven weeks, and the only really important issue now is how to rearrange the flow of commodities and goods around Strait of Hormuz。

when it comes to war or geopolitics, i always like to say, "i'm just a ski player, a two-step encryption player listening to house music." i do not know anything about war, nor do i have any inside information about what global leaders do or do not do。

BUT WHAT I CAN DO IS READ THE MAINSTREAM NARRATIVE AND USE MY AI TOOL TO DO SOME BASIC CALCULATIONS WITH OPEN DATA. I TRY TO BLOCK THE NOISE AND FOCUS ON THOSE VARIABLES THAT REALLY AFFECT MY PORTFOLIO. FORTUNATELY, I DO NOT LIVE IN THE LEVANT OR THE MIDDLE EAST REGION, SO MY LIFE AND FREEDOM ARE NOT DIRECTLY AT RISK。

In my relatively simple view of the world, there are three situations worth considering — four, strictly speaking, but the fourth, the “nuclear Armageddon”, does not exist at all, and therefore does not need to be developed。

I will then describe these situations one by one and analyse how they may affect the prices of bitcoin at a more macro level。

I don't know the probability of each of these situations happening. But what I really want to know is whether there is a portfolio structure that, in the best of circumstances, can outrun hydrocarbon energy and its primary derivatives (e.g. food and fuel prices) in absolute return; and in the worst case, even if it does not win energy prices themselves, it can at least achieve better performance than all major asset classes。

Situation I: Return to normal

IN THIS CONTEXT, THE WAR QUICKLY ENDED AND THE PRE-WAR STATE LARGELY RECOVERED. BUT A LONGER-TERM TREND IS NOT LIKELY TO CHANGE: THE PROCESS OF REPLACING HIGH-COST KNOWLEDGE WORKERS WITH CHEAPER AND MORE EFFICIENT AI AGENTS, WHO OPERATE DIGITAL SYMBOLS, IS STILL MOVING FASTER。

THE UNITED STATES ECONOMY IS THE MOST VULNERABLE IN THIS PROCESS, BECAUSE ABOUT 70 PER CENT OF ITS GDP COMES FROM CONSUMPTION SPENDING. CONSUMERS PAY FOR THEIR CONSUMERISM THROUGH BANK CREDITS, WHICH CONSTITUTE ASSETS ON THE BANK ' S BALANCE SHEET. ONCE THE SOLVENCY OF ORDINARY INTELLECTUALS DISAPPEARS, THE BANKS WILL BE FUNCTIONALLY OVERBURDENED AND WILL RELY ON LARGE-SCALE "PRINTING" BY CENTRAL BANKS。

Situation II: Tehran Station

In this situation, the United States military is either unwilling or unable to prevent Iran from restricting shipping traffic in the Strait of Hormoz。

Iran honours its commitment to allow ships from “friendly countries” to travel, but pays US$ 2 million in “passage fees”, which can be settled in renminbi, encrypted currency, sanctioned US dollars or other diplomatic arrangements。

At a time when financial hegemony over the “Pax Americana” is the worst, countries must seek to obtain the renminbi. But since most countries have a trade deficit with China, the only realistic path to obtaining a renminbi of sufficient size is to sell dollar assets (e.g. US debt or US-owned technology units) to buy in-kind gold and convert gold into renminbi through the gold market in Shanghai or Hong Kong。

AMONG THE TOP 10 ECONOMIES IN GLOBAL GDP, ONLY BRAZIL AND RUSSIA MAINTAINED A TRADE SURPLUS AGAINST CHINA, AND THEY RANKED NINTH AND TENTH, RESPECTIVELY. ON THE CONTRARY, THE “UNITED STATES ORDER” ITSELF IS THE ECONOMY WITH THE LARGEST GLOBAL TRADE DEFICIT, AND ITS FUNCTIONING DEPENDS ON AN EQUALLY LARGE CAPITAL-ACCOUNT SURPLUS。

But when countries begin to sell dollar assets in exchange for renminbi, or when spot markets fill large commodity gaps at very high prices, this capital surplus inevitably shrinks mathematically. The highly financial economic system of the United States relies on foreign investment to finance government expenditures; once foreign investment is reduced, the system cannot be reconciled。

Ultimately, falling bond prices (with higher yields) or falling stock markets will force the government to fill the financing gap through "printing."。

Situation 2: Star and flag lock

In a dramatic turn, on 12 April (Sunday), Donald J. Trump announced that the United States Navy would block all vessels entering and leaving the Strait after the negotiations between the United States and Iran failed to reach a permanent ceasefire agreement。

The blockade may turn into a kind of "breachery charge": ships need to be forced to pay fees to both sides as if they were also expressing loyalty to Iran and the United States of America “Nagon” and even to “hello Allah and Hallelujah”. It is also possible that a large number of exemptions will be granted to different countries later, turning the embargo into a “black Swiss cheese”。

But the core logic has not changed: if you have a dollar, there is no guarantee that your assets will not be seriously damaged by “piracy”, why should you have a dollar

Situation III: Imperial counterattack

In this context, the United States Air Force and Navy have done their "job" by destroying the ability of the Iranian Islamic Revolutionary Guard Corps (IRGC) to disrupt shipping through a punitive remote strike。

The Straits were reopened and all ships were allowed to pass safely, at no additional cost. With the re-establishment of the “imperial order”, countries will no longer need to use currencies other than the United States dollar in the short term, nor will they need to buy large commodities at high prices in spot markets。

But the problem is that ending Iran ' s control over the Strait would most likely mean the total destruction of the country itself. According to Donald J. Trump, "to return them to the Stone Age."。

Many Americans who grew up in the narrative of "Iran is the world's most evil country" would say hello to this tough gesture. But if Iran is destroyed in this way, it is likely that in its “last breath” the threat – to drag energy from the entire Gulf region into the abyss with the production of large commodities – will be met。

By that time, "the spices will no longer flow" (i.e., the global supply chain will have been cut), and the global central bank will have no choice but to print the money wildly in full-blown commodity prices to keep the financial system running。

If you're in some "fragile country", the local currency may have hyperinflation against the dollar or the ruble. The United States and Russia will be the only remaining large energy producers with the capacity to regulate supply, filling the gap left by a burning Middle East。

What follows is famine and widespread social unrest。

Therefore, even if you cannot leave high-risk areas in time, your own survival will be at serious risk, even if there is some piece of scrap paper that could be "infinite" on your Bitcoin account。

Situation Chart

Before specifically analysing the performance of bitcoin in unsympathetic circumstances, we will quickly go over some "charts" to support this statement with more intuitive data。

Back to normal

As I have already discussed this situation in some detail in This Is Fine, I will refer here directly to some of the graphs and tables provided at the time。

Overall, the deflation collapse triggered by AI, which has the capacity to act autonomously, was no less severe than the 2008 subprime crisis in the United States (Global Financial Crisis)。

At present, the default rate on consumer credit has begun to rise, while a real wave of mass layoffs has not even formally begun。

Tehran toll station

In essence, if this situation were to be established, it would mean the end of the "oil dollar system" and the emergence of a new global reserve currency (or basket of currencies)。

At present, the Iranian Islamic Revolutionary Guard Corps (IRGC) maintains considerable flexibility in the payment modalities. But if its control over Strait of Hormuz is truly consolidated, why should it accept toll payments in United States dollars against the backdrop of the continuing restrictions on its dollar capacity in the United States

In the end, I don't think it's going to accept the dollar settlement. The renminbi and gold are likely to become two major core clearing assets in sovereign trade。

If a country has to exchange its renminbi for gold and then pay its toll in order to complete its merchandise transport, what is the reason why it continues to use the United States dollar as a reserve

Given that most of the major economies have a trade deficit against China, the only realistic path to obtaining the renminbi is to sell dollar assets and buy gold and convert gold into renminbi。

Under such a system, countries will need to reserve gold in the future rather than dollar assets such as United States debt or equity。

To illustrate the growing use of the renminbi in trade settlements, I would like to quote some of the charts shared by Luke Gromen. These diagrams show a process in which the "nominal RMB-gold system" is forming。

Step 1: Selling dollar assets (e.g., United States debt) to buy gold

Since the outbreak of the war, foreign holdings in Federal Reserve-held securities have decreased by $63 billion in net terms. I use this data as a "directional indicator" to judge the overall position of foreign investors vis-à-vis United States debt and other dollar assets, such as equities。

So, where did these people who sold their dollar assets end up using them

Non-monetary gold has become the largest export commodity in the United States in the past five months, with a significant increase of 342 per cent over the same period。

In other words, the funds were not left in the United States, but were used to buy gold and then move it out of the United States. The narrative of the so-called "revolution of American manufacturing" is ironic in the face of reality — leaving the United States for real is a “wild heritage” (gold). For those who look forward to the return of high-paying manufacturing jobs, this is undoubtedly a failed expectation. Another presidential cycle passed, from which the blue-collar class was still unable to truly benefit。

Step 2: The exchange of gold to the renminbi

Swiss refineries receive gold from the United States and recast it into gold bars that meet the Chinese cutter criteria。

The key to this step is that Switzerland is the central hub for global gold refining, capable of reprocessing gold bars of different specifications into high purity standardized products (Discovery Alert) that meet the needs of Asian markets (especially China). In other words, the gold flowing out of the United States will not enter China directly, but will be reconstructed through Switzerland, a "transit and standard conversion centre"。

Step 3: Pay the Tehran toll

THE USE OF THE RENMINBI'S CROSS-BORDER PAYMENT SYSTEM (CIPS) IS INCREASING SIGNIFICANTLY, AND THERE HAS RECENTLY BEEN AN "ABNORMAL ACCELERATION"。

"Buffalo Bill" Bensont was very serious in saying, "Put the dollar on his body or be punished again."

Due to sanctions imposed by the United States almost 15 years ago, Iran was unable to use the SWIFT payment system. The transfer of the renminbi to the Iranian Islamic Revolutionary Guard Corps (IRGC) depends on China’s French currency settlement system, China International Payment System. As you can see, since the outbreak of the war, the volume of transactions in the system has risen significantly。

The chart shows a chain of financial flows: United States dollar assets are sold for gold, which is eventually converted into renminbi for payment to Tehran or other suppliers. The point is not that the United States dollar is still the dominant currency in trade, but that the market is forward-looking. More importantly, the use of the renminbi in global trade is increasing at an accelerated rate than the current use of the renminbi is still below the dollar. For investors, avoiding dollar assets ahead of market consensus is a way of protecting the portfolio。

Historically, the pound remained the global reserve currency in nominal terms until 1944, but in fact, with the United States economy becoming the world's most productive economy at the beginning of the twentieth century, the dollar had replaced the pound as a de facto reserve currency。

By 2026, the United States had a global trade deficit for the most productive economies (China, Japan, South Korea, Germany, Taiwan, etc.), while most countries had a trade deficit for China。

I repeat this logic: What is the point of storing your assets in the United States dollar if you have to pay the money in the renminbi to the Middle East powers of the Stone Age to get your goods

It's enough to judge whether the strait is "open" or "blocked" by looking at this chart, or by making a similar one yourself with any graphic tool。

The chart above shows a comparison between May 2026 (CL1, white line) and October (CL6, gold line) WTI futures prices. I chose WTI because this benchmark is closer to the price of gasoline for American consumers. For Donald J. Trump, he was motivated to substantially cool the situation only when oil prices put a clear strain on voters before the mid-November elections。

the following chart shows the price differential between the two contracts (deeply less than in recent months); the curve is currently in the "backward market" (backwards). as the price of oil has risen in the distant months, the market is actually in jail: oil flows through the strait will eventually increase significantly。

If this judgement is established, the spread will widen as prices fall in recent months. But if the opposite is true — rising prices in the distant months and narrow price differentials — it means that the global economy will face a sharp shock。

SO INSTEAD OF FOCUSING ON THE SALIVA BETWEEN TRUMP AND THE IRANIAN ISLAMIC REVOLUTIONARY GUARD CORPS (IRGC), FOCUS ON THE MAP。

Quantity versus price of money

The two-year return on United States Treasury debt (the white line) surged rapidly after the start of the war, well above the effective federal fund interest rate (the yellow line). This suggests that the market believed at the time that the Fed would counter rising energy inflation by raising interest rates。

Now, it is time to choose the sides: when pricing bitcoin, do you think it is more important to say "the amount of money" or "the price of money"? In my view, it is the number of currencies that determines the price of bitcoin, not the price of the currency. Bitcoin does not have cash flows, so the discount rate derived from central bank policy interest rates is not applicable to the valuation of this “Internet magic currency”. However, since the supply of bitcoin is fixed, its value in French depends on the total amount of it。

This is something that needs to be judged because we may enter a new macro state: major central banks, including the Federal Reserve, may increase interest rates while printing money (whether directly printing money or indirectly expanding credit through the commercial banking system). As war pushes food and energy prices, those Governments that are able to do so tend to subsidize the cost of critical inputs in the economy, otherwise they may cause social unrest and even famine. But in order to prevent inflation from spreading to all goods and services, central banks must also suppress demand through interest rates, especially against credit-sensitive economic activities. Any major consumer dependent on borrowing reduces expenditure when the cost of credit increases。

If the central bank does it here, then my assessment of the currency is simple: Bitcoin prices will fall in an environment where people generally cut their spending beyond food and energy. But the reality is that, whether it be allies or opponents of the “United States order”, countries must increase defence spending and hoard critical commodities. Do you want your country, like Australia, to depend on Chinese imports for almost 100% of refined energy? At the beginning of the war, China suspended exports, while Australian stocks were less than a month old. They had to turn to Singapore for help and purchase aviation fuel at very high prices, otherwise the entire country would be in a state of stagnation。

In order to avoid becoming a “garbage country”, countries need to manufacture weapons (especially nuclear weapons) and to hoard large quantities of commodities, which will lead to a significant increase in government borrowing. If domestic private investors are unable or unwilling to purchase these “bad” government bonds, central banks or the commercial banking system will print money to take over, thereby expanding the supply of French currency。

This combination of "a rise in interest rates (in currency prices) plus an expansion in monetary supply (in monetary quantities)" would lead to the fragmentation of risk assets: assets that rely on discounting cash-flow pricing would fall, while those that supply fixed or near fixed assets (such as bitcoin and gold) would rise, as the banking system needed to expand credit to support government spending on war and resource accumulation。

Before continuing to read my judgment about the movement of bitcoin in unsympathetic circumstances, remember this: You must judge which is more important between the "number of currencies" and the "price of currencies", otherwise you will not understand the seemingly contradictory price performance of different risk assets。

Back to Normal

BITCOIN MAY HAVE A CERTAIN REBOUND ONCE THE SITUATION RETURNS TO PRE-WAR STATUS. BUT THE DEFLATION SHOCK CAUSED BY AI AGENTS CONTINUES TO ACCUMULATE. BITCOIN COULD HARDLY RISE SUBSTANTIALLY UNTIL THE FED PROVIDED SUFFICIENT LIQUIDITY TO THE BANKING SYSTEM TO FILL THE BALANCE SHEET GAP CREATED BY CONSUMER CREDIT DEFAULTS. THIS DOES NOT MEAN THAT IT WILL NOT RUSH INTO $8,000 TO $90,000 IN THE SHORT TERM, BUT FOR ME, THE RISK OF PUTTING NEW CURRENCIES INTO THE MARKET IS TOO HIGH, WITHOUT THE FED’S SIGNAL TO RELEASE LIQUIDITY. AS I AM A MERE MULTI-HEAD, IT WOULD CERTAINLY FEEL GOOD TO SEE THE NET INCREASE, BUT THE CURRENT RISK-BENEFIT RATIO IS NOT ENOUGH FOR ME TO PUSH THE POSITION TO THE EXTREME。

I CANNOT JUDGE HOW LONG IT WILL TAKE FOR THE BANKING SYSTEM TO REALLY COLLAPSE. BUT ALMOST EVERY WEEK, I SEE SIMILAR NEWS: SOME COMPANIES CUT OFF A LARGE NUMBER OF KNOWLEDGE-BASED WORKERS FOR AI EFFICIENCY, AND CONSUMER CREDIT DEFAULT RATES CONTINUE TO RISE。

Take one example. I recently spoke to an entrepreneur who runs an encrypted game company, an old player in the industry. We talked about AI's impact on business. He was himself a computer engineer, who tried to develop the project during Christmas 2025 with the latest Claude model, and was quickly shocked by its efficiency -- he could produce online codes in a very short time. A few months later, he brought together a team for an in-line discussion, asked them to construct an AI programming workflow running all day, and even to automate code review. As a result, tested codes are available every morning. One employee, supported by AI, completed the original six-month development plan in four days。

After this, he decided to adjust the company's processes immediately, and about 50 percent of the company's employees will be laid off in the next few weeks。

In the AI age, ordinary engineers will become redundant, while the productivity of top engineers will increase 10 to 100 times. As the model continues to build capacity in various subdivisions, a large number of medium-level knowledge workers will be at risk of unemployment。

THE PROBLEM IS THAT EVEN WHERE UNEMPLOYMENT INSURANCE EXISTS, THE HIGHEST ANNUALIZED SUBSIDY IN THE UNITED STATES STATES IS ABOUT $28 MILLION, WHILE, ACCORDING TO DATA FROM THE UNITED STATES BUREAU OF LABOR STATISTICS (BLS) AND THE ST. LOUIS FEDERAL RESERVE, THE MEDIAN ANNUAL SALARY FOR INTELLECTUALS IS ABOUT $85,000 TO $90 MILLION. THE GAP IS HUGE, AND THE RESULT CAN ONLY BE THAT A LARGE NUMBER OF PEOPLE BEGIN TO DEFAULT ON BANK CONSUMER CREDIT。

This is a fatal blow to the current system of "fictional" partial reserve banking。

In summary, after the ceasefire, the United States SaaS software unit resumed its unilateral downward trend, while Bitcoin stabilized and rebounded. The temporary decoupling of this relevance is encouraging, but it is too early for me to assert that Bitcoin has "seen through" the deflation of knowledge workers triggered by AI。

Tehran Toll Booth

As countries sell their dollar assets in exchange for the renminbi and pay the “passage fee”, the US debt and stock prices will fall. The process may be gradual, as there are still ways of paying other than the renminbi. However, given the high leverage structure embedded throughout the system, a small shock can also trigger a ripple effect — more pallets from sales, higher volatility and freezing market liquidity. At this point, the monetary authorities will have to take action to stabilize the situation through "print money"。

The indicator requiring attention is the MOVE Index (United States bond market volatility index). Once the index rises to more than 130, it often means that some form of monetary easing is imminent。

With the rise in volatility and the fall in the prices of large United States technology shares, it is very unlikely that there will be a strong rise in Bitcoin. When investors are risked by increased market volatility and falling asset prices, they tend to sell bitcoin to meet bond requirements. Bitcoin will only really rise when the situation deteriorates to a certain extent and when the market is generally expected to deliver relief。

Wait until Becent, or any then Fed Chairman, press the "Brrrr" button. The risk-benefit ratio was not cost-effective because of an earlier attempt to set it up. I hope that bitcoin will hold $60 million when there are systemic financial shocks to traditional markets. If it can be tested for the second time and stabilize this level, I would prefer to gradually increase the risk exposure。

Star-Spangled Blockade & The Empire Strikes Back

The global economy would be hit if the prices of crude oil futures increased rapidly in the long term and were to be evened in cash or in recent months. At one point, the contraction of demand will hit the United States debt and the United States stock market. Similar to the previous situation, the initial response was still a drop in bitcoin. And when the highly leveraged Western financial system begins to collapse, the printing machine will be activated again。

If the final situation evolves into a lifting of the blockade through punitive bombing of Iran, while Iran destroys the entire Persian Gulf energy capacity in its counter-attack, this could even lead to a collapse at the Iranian national level. In this case, the increase in bitcoin driven by "in print money" could be brief, as it would significantly increase the risk of World War III。

Portfolio Construction

As a non-leveraging, full-headed investor, Maelstrom can rely on time and profits to function naturally. Over the past few days, the slight overperformance of bitcoin relative to IGV, SaaS ETF, has been a positive sign, which has allowed me to re-examine the pre-existing bias based on "AI triggers deflation of knowledge work."。

At this stage, the only assets I'm willing to increase exposure to risk are gold, and $HYPE. The HIP-4 will be online in a few weeks, and I expect it will take a significant share of the market from Polymarket and Kalshi in the projected market track。

Beyond that, the only thing I can do every day is to pray that Satoshi will be able to "mix" the thinking of the global political elite and let them opt for drugs instead of bombs。

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