BitMEX co-founder Arthur Hayes says bitcoin’s the recent 52% crash from its October peak is flashing a critical warning signal – but the crypto could eventually soar to new highs as the Federal Reserve reacts to an AI-driven banking crisis he believes is imminent.
In his latest essay, “This Is Fine,” Hayes argued that bitcoin’s divergence from traditional tech stocks reveals its role as the “global fiat liquidity fire alarm.” While the Nasdaq has remained relatively flat, bitcoin has fallen from $126,000 to its current $67,000, pricing in what Hayes describes as a massive credit destruction event that equity markets have yet to recognize.
“Bitcoin is the most responsive freely traded asset to the fiat credit supply,” Hayes wrote. “The recent divergence between bitcoin and the Nasdaq is sounding the alarm that a massive credit destruction event is imminent.”
Hayes models a scenario in which AI displaces just 20% of America’s 72.1 million knowledge workers, triggering approximately $557 billion in consumer credit and mortgage defaults—about half the severity of the 2008 financial crisis. This AI-driven shock would destroy regional banks and force the Federal Reserve into “the biggest money printing in history,” he predicts.
“Deflation is bad, but ultimately good for fiat credit-sensitive assets like Bitcoin,” Hayes said. “First, the market is pricing in the impact … Then … the monetary mandarins panic and hit that Brrrr button harder than I shred pow the morning after a meter dump.”
Hayes noted gold’s recent gains, especially against bitcoin, as another red flag, saying that “a rising gold versus a falling Bitcoin clearly tells us that a deflationary risk-of-credit event within the Pax Americana is brewing.”
Hayes said that once the Fed steps in with emergency liquidity measures — similar to the March 2023 response to regional bank failures — bitcoin will “decisively pump out of its lows” and the expectation of sustained money printing will propel it to new record highs.
That doesn’t mean there won’t be more pain ahead for the foreseeable future, Hayes said. He warned that bitcoin could fall further before the Fed acts, potentially breaking below $60,000 as political dysfunction delays the central bank’s response. Crypto investors, he advised, should stay liquid, avoid leverage and “wait for the Fed to realize it’s time to dump dirty fiat and monkey into risky assets with reckless abandon.”
