Arthur Hayes' latest speech: From AI deflation to war-time inflation, Bitcoin's target price was $125,000 at the end of the year

Photo by Felix, PANews

Arthur Hayes, co-founder of BitMEX, gave a speech at Bitcoin 2026, in which Hayes explained why Bitcoin was viewed well, why Kevin Walsh was not the falcon, and how a banking regulation that entered into force on April 1 might release trillions of new credits。

In addition, Hayes proposed a target price of $1.25 million at the end of the year for bitcoin and explained his theory of "war-printing" to that end。

The speech was organized by NewsThe details are as follows:

OVER THE PAST FEW DAYS, I HAVE COME TO THIS SPEECH BY THINKING IN DEPTH ABOUT HOW THE PRINTING POLICY WILL EVOLVE AND BY TAKING INTO ACCOUNT DEVELOPMENTS IN AI AND THE WAR IN IRAN. OBVIOUSLY, MY ATTITUDE HAS SHIFTED TO A HIGHER PROFILE, AND I'LL EXPLAIN WHY。

Of course, we cannot ignore the ongoing war, so I must establish a few assumptions before proceeding with the core arguments。

First, we will not die of nuclear destruction, because any investment will be meaningless in the event of nuclear destruction, and we set aside that concern for the time being。

Secondly, the market would view the incident as a kind of "short-term" event, whatever that means. Now is the time to think about the creation and printing of currency and what this coin means。

Every morning, I used a chart from Bloomberg to analyze how the war actually affected my portfolio。

THIS CHART SHOWS THE DIFFERENCE BETWEEN THE SIX-MONTH FUTURES CONTRACT FOR WTI CRUDE OIL AND THE CURRENT MONTH'S CONTRACT. I DON'T CARE AT ALL ABOUT THE WAR OF PROPAGANDA ON THE PART OF TRUMP OR IRAN, BUT MY ONLY CONCERN IS WHETHER THERE ARE ENOUGH GOODS AND OIL TO PASS THROUGH THE STRAIT

The graph shows that the situation has improved, which means that front-end prices are tending to the back end, which suggests that the situation is not so bad as it is. So I can ignore it for a while and keep thinking about other things。

Every time I go on stage, I talk about printing money. From an article I published about two weeks ago, my mind has changed, I thinkIn the medium to long term, liquidity will change to positive。SO IF WE LOOK AT THE NEGATIVE SIDE, WE'LL FIND THAT AI BROUGHT DEFLATION。

It has been discussed that many knowledge workers will lose their jobs because of efficient and cheap models that can complete knowledge-based work. A few months ago, I wrote an article setting out my expectations for these losses. I think this could cost the banking system hundreds of billions of dollars。

As for the Fed, we will talk later。

The market is very worried about the Fed’s Chairman’s choice, Kevin Walsh, and everyone is speculating whether he is an eagle or a pigeon。

I will analyse his statements objectivelyBasically, his statements are neutral and do not benefit or harm mobility。Those marketers who were terrified that Walsh was the Chairman of the Superhawk Fed did not actually read the signals behind them。

Finally, let's look at commercial bank loans. Why would commercial bank loans increase? Why would the war economies of the United States and abroad prompt banks to extend more loans to those involved in the production of various weapons and related components? In addition, changes in bank regulation would allow banks to increase their balance sheet leverage。

THIS CHART, WHICH I'VE BEEN FOLLOWING SINCE OCTOBER, REPRESENTS THE NASDAQ INDEX, THE GOLD LINE REPRESENTS THE PRICE OF BITCOIN, AND THE WHITE LINE REPRESENTS THE US SCIENCE AND TECHNOLOGY UNIT ETF。

Now, most people, at least institutional investors, believe that the price of Bitcoin is close to the NASDAQ index and that it has done so for the past four or five years. However, since October of last year, when Bitcoin had a record record of $126,000, it had fallen by about 50 per cent, while the NASDAQ index remained stable. Large science and technology units are performing well。

But if you look closely at those technology units that have been severely damaged, you'll find that they're almost all SaaS companies, which now produce AI for 10 dollars a month, and they're asking for $10,000, or some other ridiculously high price。

These stocks were severely damaged. I think it bodes well for a credit crunch that central banks are not aware of, that they do not print enough money, and that bitcoin is affected. This was before the war. The deadline for my chart is February 28th。

My other wish is to fire all my accountants and lawyers。

I spent too much money on it. I can't wait to get Claude to take over everything. This will have a very bad impact on those who extend loans to highly paid persons。

AND THAT'S BASICALLY WHAT I THINK ABOUT AI BECOMING THE NEW SUBPRIME CRISIS AND WHAT IT MIGHT MEAN FOR THE COMMERCIAL BANKING SYSTEM。

I think that's exactly what caused Bitcoin to fall from last October to the end of February of this year when the war broke out between the United States and Iraq。

But since the beginning of the war, Bitcoin has performed better than other stocks, surpassing NASDAQ and SaaS stocks。

I think bitcoin is now focused on war inflation。

What happens next, given that the United States and many other countries have clearly acknowledged that they are in a state of war, that their defence spending is insufficient and that more money is needed to make more bombs

SO, FOR THE TIME BEING, PUT AI ASIDE AND THEN TALK ABOUT THE FED. IN JANUARY THIS YEAR, WHEN KEVIN WALSH WAS NOMINATED AS CHAIRMAN OF THE FED, THERE WAS A PANIC IN THE MARKET. SINCE THE 2008 FINANCIAL CRISIS, HE HAD BEEN CRITICAL OF THE LARGE BALANCE SHEET OF THE FED AND HAD PUBLICLY EXPRESSED HIS DESIRE TO SCALE AND REDUCE INTEREST RATES。

If you read my article, you'll knowI have always argued that the amount of money is more important than the price。So..I care more about his statement about balance sheets than about how short-term interest rates go。

If the market believes that the dollar liquidity on the market will be reduced as a result of Walsh's coming to power, it will look at bitcoin and other risk assets。

This is what we have recently seen in the media as "the incoming Chairman of the Superhawk Fed."。

These provisions will limit the manner in which banks hold assets on their balance sheets and the capital funds they must hold for that purpose。

But I don't think so。I think the Fed would essentially transfer reserves, bonds and buy-back agreements to the commercial banking system, and through new banking regulations。

These provisions will limit the manner in which banks hold assets on their balance sheets and the capital funds they must hold for that purpose。

And finally, I think it's important to understand Warren's influence on the Fed and to understand that he's facing a very important constraint, and that's..He must work closely with the Minister of Finance, Scott Besent, to ensure that any operation of his balance sheet with the Fed does not undermine the ability of Besent to issue billions of dollars in bonds。

HERE'S A VERY SIMPLE BALANCE SHEET. THERE ARE NO SPECIFIC FIGURES HERE, BECAUSE I KNOW THAT THIS IS A LITTLE COMPLICATED FOR SOME PEOPLE. ASSETS INCLUDE NATIONAL DEBT, MORTGAGE SUPPORT SECURITIES (MBS) AND REPURCHASE AGREEMENTS. THESE ARE TOOLS TO HELP PEOPLE FINANCE THE PURCHASE OF NATIONAL DEBT. THE LIABILITIES INCLUDE BANK RESERVES, GENERAL ACCOUNTS OF THE MINISTRY OF FINANCE, GOVERNMENT CHEQUE ACCOUNTS AND CURRENCY IN CIRCULATION。

Basically, from 2008 to date, the Federal Reserve has increased its liability for bank reserves and purchased assets from the banking system。

These assets include national debt, mortgage support securities and repurchase agreements. When Warren said that the balance sheet was too big, he meant that the Fed held too much bonds, and he wanted to be able to shrink the balance sheet. So he might sell bonds. But this would have a huge impact on the market。

Or I think it is now implied that he would swap his assets with the United States banking system. The balance sheet of commercial banks, the reserve of the Federal Reserve, is also considered an asset. Approximately $3 trillion is held in the Federal Reserve ' s balance sheet. Their sources of funding include loans, deposits and shareholder rights。

Therefore, a certain amount of interest must correspond to a certain size balance sheet. That is the so-called capital adequacy rate. So the Fed and the banks need to switch. Banks need to release reserves, reduce the need for them and replace them with national debt and repurchase agreements。

This is precisely what the United States commercial banking system has driven by deregulation. So whenever you hear the United States Government's currency officials talk about deregulation, they mean that we want to allow the banking system to absorb all the debt we create and remove it from the Fed's balance sheet。

The ultimate goal is for United States commercial banks to take over from the Fed the poles of currency creation, and their balance sheets will contain national debt and buy-back agreements, while the liability side will include deposits and shareholder equity。

The key to all this is that the net effect on the liquidity of the dollar is neutral。

Nothing was sold and nothing was bought. It was a swap deal。This is purely regulatory expediency in terms of who can hold what. But eventually, Walsh can come out and tell you that he succeeded in narrowing the Fed ' s balance sheet. But in fact, as investors, we only care about the end result? The end result is nothing。

Furthermore, Walsh would not be in conflict with Besent. They used to have a picture of Powell's face, and now they're gonna change it to Walsh. After all, we've released $38 trillion in debt, and governments need money. The Fed carries out its responsibilities to ensure orderly markets so that people can purchase these debts。

And look at expenditure, this is a chart of the fiscal year, from October to September of the following year. As can be seen, from the time of the new outbreak to the time of the presidential term, to the time when the largest peace-time deficit in the history of the United States is now, the deficit in fiscal year 2026 was slightly higher than in fiscal year 2025。

NOW, THE FOCUS OF ALL THIS IS THAT THE UNITED STATES TREASURY DEPARTMENT WILL NOT REDUCE EXPENDITURE. TRUMP DID NOT SAY THAT THERE WOULD BE SIGNIFICANT CUTS. LAST YEAR'S DOGE PROJECT WAS FORGOTTEN。

It's all war time. His new defence budget is 50 per cent higher than before, reaching $1.5 trillion. It doesn't sound like the Treasury or politicians are working together to reduce spending so that the Fed can shrink。

As a result, all claims that the Federal Reserve has reduced its balance sheet do not make sense, as politicians and the Treasury behind them are increasing the size of their debt。

Here's another chart. Who's buying these debts? The amount of debt paid by foreigners is lower than before。

I have excluded countries that are usually used for hedge fund base trading. As can be seen, the 25 per cent share of debt held by foreigners has remained almost constant, while the total debt has increased significantly, which means that a new priceless buyer, the United States commercial banking system, is needed to buy all of these debts。

THE INCREASE IN DEBT HOLDINGS IN THE BANKING SYSTEM WAS MADE POSSIBLE BY THE NEW REGULATORY PROVISION THAT CAME INTO EFFECT ON 1 APRIL OF THIS YEAR: ENHANCED REPLENISHMENT (ESLR)。

The new regulation allows banks to hold fewer reserves and other types of assets to support loans and other items on their balance sheets. This means that large banks, such as Morgan Chase and Citibank, can issue more national debt and buy back bonds on the market and obtain extensions from the Fed。

For small banks that are engines of economic lending in the United States, they can increase the delivery of construction and industrial loans。

S&P Global estimates that this reduction in the balance sheet of ESLR u will result in new loans of US$ 1.3 trillion. So, why does the bank need a loan

One of the criticisms of this analysis by some other macroeconomic analysts is that the banking system lacks demand, does not generate sufficient loans, or is insufficient. But there is an excellent source of demand, the United States Department of Defense. They would not only invest equity in certain transactions, but also provide guarantees for under-purchase production。

When banks see a business having a guaranteed customer like the Government (which can print money), they lend. They also lend loans to resource miners who exploit the critical resources needed to make bombs。

FINALLY, ALL AI CAPITAL EXPENDITURE IS NOW CONSIDERED A NATIONAL SECURITY ISSUE. THUS, WHEN A MEGA-ENTERPRISE CANNOT FINANCE ITS DEBT WITH A FREE CASH FLOW AND INSTEAD SEEK MARKET FINANCING, THEY FIND LARGE BANKS WITH LARGE BALANCE SHEETS WILLING TO SUPPORT THEIR DEBT。

So pay close attention to the construction industry loan, and I think you can get the relevant information from the Fed every week。

The advantage of bank lending is that its multiplier effect is higher than that of central bank lending, and experience shows that it is about three times higher。WE HAVE OBSERVED THIS THROUGH EXPERIENCE. THIS MEANS THAT ABOUT $4 TRILLION WILL BE GENERATED, WHICH IS MUCH GREATER THAN THE CREDIT LOSSES THAT AI COULD HAVE CAUSED BY STEALING PEOPLE'S JOBS, AND THAT'S WHY I'M LOOKING AT BITCOIN。

This liquidity chart was at the bottom of November last year, roughly the same time as the bitcoinI don't know. I think we have experienced some shocks and some fluctuations. It is time for a breakthrough. That's why I believe bitcoin will continue to rise。I think my end-of-year target is about $1.25 million, but the figures are not important。Thank you。

Original Video Link