In the world of cryptocurrency, filtering out the ‘noise’ and focusing on the ‘signal’ can feel like an insurmountable task. Within this digital cacophony, a multitude of voices compete for attention, each promoting diverging ideas and perspectives. It is, therefore, no surprise that newcomers might quickly feel overwhelmed by this complex ecosystem and choose to abandon their crypto adventure prematurely.
Despite the pandemonium, a select few influential figures emerge whose opinions significantly influence the prevailing narrative in the cryptocurrency sphere. One such individual, a personal inspiration of mine, has maintained a somewhat clandestine status among the crypto ranks, despite his profound insights – Arthur Hayes.
For anyone with even the slightest interest in cryptocurrencies, neglecting to familiarize oneself with Arthur Hayes’ work equates to a substantial missed opportunity. As a considerable amount of the information shared in this space draws from Hayes’ insights, it seemed fitting to spotlight the master himself and delve into his latest piece, titled “Massa,” published just recently.
For the uninitiated, Arthur Hayes is synonymous with Bitmex, a pioneering cryptocurrency exchange that embodied the adventurous spirit of early crypto with its daring derivative offerings. Bitmex was a haven for the most audacious investors – it was an all-or-nothing game of chance. After falling under heavy regulatory scrutiny in 2020, Hayes stepped away from Bitmex as it halted operations in the U.S. Thankfully, this was not the last we heard from him.
Beyond Bitmex, Hayes has built a reputation as a prolific writer and unwaveringly bullish analyst in the crypto space, long before it became mainstream. He excels at deconstructing current narratives and speculating on their future trajectories. What sets Hayes apart is his broad-minded approach; his analysis extends beyond Bitcoin to Ethereum and the occasional altcoin. Now, let’s delve into “Massa.”
“Massa,” a term referring to a master or slave owner, headlines Hayes’s essay and sets the stage for his primary query, “Will AI supplant feeble humans and become humanity’s massa/slave master?” Essentially, in “Massa,” Hayes explores the intersection of the emerging AI narrative with cryptocurrency, advising investors on how to position themselves to maximize benefits. His primary thesis is: “Bitcoin Will Be the Currency of AIs.”
As is characteristic of Hayes, his arguments inevitably circle back to highly bullish forecasts and narratives.
According to Hayes, an AI payment system should possess the following characteristics to thrive:
- 100% digital
- Clear, transparent rules
- Absence of a single entity with the authority to arbitrarily change rules
- Censorship-resistant
- Always available
- Fully automated
Does this list remind you of a certain cryptocurrency? Could it be Bitcoin?
You might consider gold as a contender, but digital gold, as it currently trades online, depends on a “Cartel of Trust” (i.e., banks and governments). How about digital systems like PayPal? Unfortunately, these centralized digital systems are also beholden to the banking system. And then there’s fiat currency, which combines all the worst elements of every alternative to Bitcoin.
So, if Bitcoin becomes the currency of AI, and if AI is the revolutionary force we anticipate it to be, how will Bitcoin benefit? The answer to that question requires a bit of speculation and hyperbole. We must estimate the proportion of global GDP that the market expects to be driven by AI in the next decade. Hayes proposes that this figure could range anywhere from 5% to 50%.
With some intricate math factoring in future transaction volumes and the portion of GDP captured by AI, using this equation: BTC Price Estimate = (([Size of AI Economy %] * [2022 P / 365] * [Bitcoin Market Cap to Daily Transaction Value Multiple] * [100% The Velocity % of Payments]) / [Total BTC Supply]) + BTC/USD Spot Price, Hayes presents the matrix below. The potential outcomes may seem staggering, yet fascinating in their implications.
Does this seem preposterous? Undeniably, yet the core principle, as Hayes elucidates following the complex calculations, is simple: “remember – the market will overpay for Bitcoin network growth if it believes there is a possibility that my assumptions could be true in the future. The most money is made when the market price adjusts from ‘can never happen’ to ‘maybe could happen.'”
Hayes’s blog serves as an exciting exploration of Bitcoin’s potential trajectory with AI. However, it’s crucial to remember that Bitcoin’s future cannot be reduced to AI and GDP or any other combination attempting to explain its price. No formula can accurately forecast price.
While the AI perspective is comprehensive, it overlooks several key factors such as institutional participation, nation-states accepting Bitcoin, governments incorporating it into their reserves, and the individual financial decisions of the 8 billion people populating our planet.
The future price of Bitcoin will forever be an enigma until the future manifests itself, adding to the exhilaration of investing in this asset. We are given the privilege of a front-row seat to witness in real-time the subversion of traditional financial structures by these small orange seeds. Predicting how fast or far Bitcoin will proliferate is pure speculation – the sky’s the limit.
I highly encourage you to peruse Arthur Hayes’ Blog, the source of inspiration for this newsletter. His insights into the world of cryptocurrency stand head and shoulders above any other available resource.
