Arthur Hayes clears his positions and turns bearish on Bitcoin: AI has drained liquidity, making it hard for BTC to break $100,000

Arthur Hayes Liquidates Positions in HYPE, NEAR, and Others, Believing the AI Bubble Will Burst and Devour All Risk Assets, Making It Difficult for Bitcoin to Rebound to $100k in the Short Term.
(Background summary: Legendary investor Carman warns of AI bubble: his firm Baupost has refused to invest in OpenAI and Anthropic)
(Additional context: Arthur Hayes: AI is the new subprime crisis, market narrative shifting from deflation to war inflation, Bitcoin expected to hit $125k by year-end)

Table of Contents

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• Midterm Elections: Trump’s AI Reversal Strategy
• SpaceX IPO: The Time Bomb of 100x Price-to-Sales
• AI Bubble: Liquidity Draining Crypto Market
• Rate Hike Expectations: The Pillar of Rate Cuts Collapsing
• Investment Shift: Energy Stocks Outperform Bitcoin

This article is compiled from Kyle Chasse’s crypto analysis on YouTube. Arthur Hayes has liquidated his largest crypto holdings—HYPE, NEAR, Worldcoin, and Zcash—not because of crypto itself, but due to a macro chain of reasoning from oil prices, Iran war, Trump’s midterm strategy, to the bursting of the AI bubble. He believes Trump might reverse his stance and attack the AI industry to recover midterm election disadvantages, and once the AI bubble peaks, the crypto market cannot remain unaffected; SpaceX’s IPO with a valuation of $1.8 trillion and a 100x sales ratio is, in his view, a liquidity time bomb waiting to explode.

Host Kyle Chasse: Arthur, welcome back. Recently, you sold all your holdings in Zcash, HYPE, NEAR, and people are criticizing you for exiting the scam, raising prices to sell off, and so on. Why did you sell everything? What’s really going on?

Arthur Hayes: I just published an article called “Reality Check,” about five thousand words, explaining the points I’ll briefly cover in this podcast. If you want a deeper understanding of my reasoning, I strongly recommend reading it on my Substack. But essentially, it’s about a reflexive interaction between oil prices and Trump’s midterm campaign rhetoric—he needs to help the Republicans beat the Democrats in November and hold the House and Senate. The current Iran war—whether you like it or not, it’s there, right here, now.

So Trump and the Iranian Revolutionary Guard need to reach some agreement to end this conflict. Both sides are constrained by reality: oil prices determine how angry different regions are at each other. Trump must worry domestically—voters dislike high oil prices, dislike energy-driven inflation.

Iran faces pressure from China and other developing countries—“What the hell are you doing? We need this oil, these goods passing through the Strait of Hormuz. I know the US attacked you, but find a way to fix it.” So, the higher oil prices go, the more eager everyone is to negotiate; when prices fall suddenly, no one wants to reach an agreement anymore. We’ve been swinging back and forth in this tug-of-war for about three months, or as long as the war has been ongoing.

As this process unfolds, we are actually gradually depleting commercial and national reserves of oil and other hydrocarbons. Pick any energy analyst—charts vary, but conclusions are consistent: pre-war inventories were ample, so people believed oil and natural gas supplies were oversupplied, leading to relatively low prices.

But now we are consuming these surpluses at an ever faster rate. At some point, we will hit a level—I don’t know, in the tens of billions of barrels—each analyst has their own number and projected date. Once that date passes, things will suddenly turn very, very bad. The only way to restore market balance is to rapidly push oil prices higher.

This is the worst-case scenario—Trump and the Iranian Revolutionary Guard cannot reach an agreement. By October, the Strait of Hormuz remains effectively blocked, with only 25-30% of shipping volume passing through, far from enough. A more likely scenario is that in a month or two, some agreement is reached, and shipping through the strait somewhat resumes.

But then everyone needs to rebuild inventories—you must rebuild national reserves, and of course, you’ll stockpile even more than before—because you’ve just experienced firsthand how Trump and a group of Iranian generals can manipulate your country’s access to goods.

Midterm Elections: Trump’s AI Reversal Strategy

So you think: “I need to stockpile more oil, natural gas, helium—everything needed for a modern economy.” This will boost demand, though perhaps not enough to push prices to catastrophic levels, but still meaning that in three or four months, oil, natural gas, and other commodity prices will be higher than today.

Arthur Hayes: Following this logic, the upcoming midterm elections in November 2026 (2026年11月)—the House is very likely to flip—look at Polymarket’s open positions, the Democrats’ chances of retaking control are already at 82%.

Why? Clearly, Trump is being hammered on the cost of living. People see inflation as terrible and worsening. In voters’ eyes, the current White House is controlled by Republicans, and this damn conflict and war—started by them—are their fault. So, naturally, they believe Republicans will lose badly.

The problem is, there’s little you can do about inflation—policy effects are lagged, and supply chains are only now digesting what happened three or four months ago.

I don’t think Trump can do much to change the inflation narrative. People see and feel it at the gas station—there’s no magic trick for Trump to make inflation disappear; it’s there, every time you fill up. So what other issues could shake the entire US political spectrum? The answer is AI data centers—regulation, taxes, all that.

I think the Democrats are finding a great campaign narrative: no more building data centers, taxing AI giants, regulating AI. Because not only the poor will lose jobs, but the wealthy’s jobs will also be replaced by AI—at least that’s what people fear.

Arthur Hayes: If the opposition party can exploit this fear, they hold two powerful pieces of information: one, that the war and resulting inflation are caused by the Republicans; two, that there’s a genuine wave of AI construction backed by Republican politicians. So my theory is, if Trump wants to flip the script, the only issue he can turn around is AI.

Taking the Democratic side, he might say: “We need to scrutinize data centers more, establish a national AI dividend, tax them.” That’s Trump-style rhetoric. He can say a lot, but what he actually does after November is another matter.

I think this is their only chance to win—portraying themselves as the party protecting Americans from AI harm, and then Americans will forget that it was the Republicans who financed all this, because people are forgetful. So I see this as the main risk.

And Trump’s willingness to attack AI depends purely on oil prices, which are a reflexive outcome of his relationship with the Iranian Revolutionary Guard. The longer this war drags on without resolution, the more we accumulate future pressures on commodities that could push prices higher. Trump is more likely to use AI as a tool to try to win the election, at least to help Republicans hold the House.

Clearly, the most destructive aspect of the AI narrative is taxation and regulation. We’ve already seen in Korea—when a politician called for a national AI tax, that day Cosby’s stock hit the limit down.

So I think if this rhetoric starts being promoted by the ruling party, especially openly by Trump, we’ll see the AI bubble peak—at least in the next few months until the election—and that will drag the crypto market down with it. That’s the core argument. I really don’t want to think about this anymore, so last week I liquidated my entire portfolio.

Host Kyle Chasse: What are your most liquid assets now—cash or government bonds?

Arthur Hayes: Government bonds and energy stocks.

Host Kyle Chasse: Do you still think energy can hold up if the AI bubble bursts?

Arthur Hayes: We still need oil—whether you like it or not. People need oil; it drives civilization. And I’m not saying AI won’t keep growing; the problem is, our willingness to pay a multiple for this growth will decline, so these assets’ prices will fall.

That doesn’t mean these companies won’t be profitable—just that we expected even better profits, and now they’re not as good, so we sell. That’s the logic.

Arthur Hayes: I trade based on feel and intuition, not analysis. I sense we’re in some phase of the AI bubble—I’m not sure which. I listened to Marco Papovich’s podcast over the weekend; he’s a strategist at BCA, with a great YouTube channel called Geopolitical Cousins. I highly recommend subscribing.

He’s said many things in the podcast and written in articles—he makes an important point: when you invest in AI, you’re not investing in profits, but in capital expenditure for data centers.

SpaceX IPO: The 100x Sales Time Bomb

I often forget this: you’re investing in the second derivative—trend acceleration or deceleration. If the trend accelerates, you’re willing to pay an infinite multiple for future revenue; if it decelerates, you’re not. And this thing won’t rise as fast as you need.

He recently posted a chart showing the second derivative of capital expenditure growth—higher numbers mean harder to accelerate. We’re already at $800 billion in 2026, and he predicts the second derivative of AI capital expenditure will start decelerating from 2027. You can’t pay 100x sales for SpaceX or any AI company when both profits and capital expenditure are decelerating.

Even if these companies’ revenues are still growing, that’s not the point—the point is how fast they’re growing, how much that rate is changing, and your perception of that change. Mathematically, based on the law of large numbers, in the near future, the growth rate of capital expenditure can’t be as fast as from 2023 to 2026—that’s physically impossible.

So, when will the market discount this future and say, “I’m no longer willing to pay 50, 60, 70 times earnings for these AI stocks or supply chain companies”? When will the market realize that opposition parties worldwide are exploiting this zeitgeist—“screw data center inflation, screw AI replacing my job”?

Why are only Elon, Sam Altman, Zuckerberg, and about fifteen others becoming trillionaires, privatizing all human knowledge? And what about my share?

This isn’t unique to the US; worldwide, people are asking: if AI is trained on human interaction data, and they legally or illegally use all this public and private data, why can they enjoy all the profits? For those with enough assets involved in these equity stories, it’s a legitimate question.

Eventually, the market will feel a backlash. There’s always conflict between capital and labor—voluntary or forced—and at some point, some agreement will be reached. If you hold those assets when that happens, you’ll probably get crushed. These thoughts keep circling in my mind. So I sat down, tried to figure out what’s really happening, and spent a morning liquidating.

Host Kyle Chasse: Where do you think the market will go from now until the end of the year?

Arthur Hayes: To answer that, I’ve been pondering another question: why hasn’t Bitcoin risen above $100,000 since November 2022? I’ve said repeatedly on your show and elsewhere: it all comes down to liquidity. If future liquidity increases, Bitcoin should go up.

But now it’s clear that’s wrong. Because if we count from ChatGPT’s commercialization on November 30, 2022, Bitcoin has indeed risen, but AI stocks like Nvidia have risen much more. When did Bitcoin peak? Last October, at $125k. So, all the liquidity created during this period—my model estimates trillions of dollars—why hasn’t Bitcoin hit $500k or $1 million? Why has it lagged behind AI?

I usually don’t look at where the money flows; I just say “more money, so Bitcoin should rise”—a lazy way of thinking, which has worked before, but not this time. So I revisited my model, asked myself: what am I missing? The answer is, we all believe AI might be one of the most transformative technologies ever, undergoing massive capital expenditure—trillions.

But how much debt has AI swallowed during this period? Has AI actually squeezed out all other risk assets, pre-absorbing excess liquidity?

On a macro level, I rarely use M2 because I think it’s too coarse, not detailed enough, but let’s use it as an example.

Since ChatGPT, US M2 has increased by at least $1.5 trillion. I also asked Perplexity AI: how much debt has been issued to AI and related companies? The estimate is about $1.5 trillion, with $1.3 trillion issued between 2025 and 2026.

In other words, although the AI frenzy ignited at the end of 2022, the debt pump in capital markets is actually skewed toward the later stage, only really ramping up recently.

My theory is, Bitcoin’s rebound from lows is due to the creation of substantial liquidity, and AI has not significantly drained it before 2025, giving Bitcoin blue skies to leverage this liquidity wave.

From 2022 to mid-2025, factors like reverse repos declining and others favor it. But looking at AI companies’ capital expenditure and loan charts, the real volume picks up in 2025, especially 2026. And that’s exactly when we see Bitcoin struggling—peaking last October, now down 50-60%. So if all liquidity flows into AI, with no signs of stopping.

If an AI bubble correction or burst occurs, investors won’t suddenly pour a huge amount of money into Bitcoin; they’ll sell AI, sell Bitcoin, sell everything. When the bubble bursts, all assets are perfectly correlated—everything falls together until the dust settles, then some assets start to outperform.

Therefore, if I believe that in the next six months, due to rising oil prices and US political factors, the AI complex will undergo a major correction, Bitcoin can’t escape unscathed either.

AI Bubble: Liquidity Drains Crypto Market

After correction, it should perform better, but you must go through that decline first. That’s why I currently see no environment very favorable for Bitcoin and other cryptos.

And clearly, my positions in NEAR, HYPE, Worldcoin, and Zcash have been very profitable—I sold at a profit. I want to pocket the gains from these trades and sit on the sidelines. These assets might continue to rise, but at least in my model, I feel uncomfortable with the risks at this point—those foreseeable unknown risks and how they might evolve—so I’ve exited.

Host Kyle Chasse: There’s another thing I’ve been thinking about. The S&P 500 is rising, but most stocks are actually falling; the index is being dragged by a few tech giants. More importantly, we’re about to see new IPOs from OpenAI, Anthropic, and SpaceX, possibly over $4 trillion in new market cap entering stocks. Do you think these will drain liquidity from everyone for a while? How do you see these IPOs playing out?

Arthur Hayes: I think these are unlikely to perform well because market expectations aren’t that they’ll trade normally—they expect these IPOs to surge 50%, have outrageous gains, to prove that the market still believes in AI, that they picked the right star company, and that it will keep soaring.

SpaceX’s valuation of around $1.8 trillion will make it the seventh-largest company globally. To go up another 50%, it would need to surpass Amazon. If you read its S-1, you’ll see SpaceX’s valuation is close to 100x sales. That’s utterly absurd—becoming the seventh-largest company without proving anything.

Yes, it’s a great idea—space data centers, policy issues around ground data centers, I agree that logic makes sense. I follow a Substack called Semi Analysis, which does deep research on semiconductors and AI.

They wrote an article comparing the costs of space data centers versus ground data centers, concluding: operating data centers in space costs four times more than on Earth. Not only that, but there aren’t enough chips to realize Elon’s vision, and building data centers on the ground is still feasible. Building on the ground might be less easy than expected, but it’s four times cheaper, so you’ll choose ground until you simply can’t anymore.

According to the most optimistic estimates, space data centers won’t truly reach cost parity with ground-based ones for at least ten years.

So the current reality is: the entire network of capital is willing to pay 100x sales for a product that’s four times more expensive, with rockets that might explode, and won’t make real money for at least a decade. And most critically, it’s a classic crypto scam—low liquidity, fully diluted valuation junk coins. 4-5% circulating supply, rising to nearly 25% by September, insiders selling from July to October, yet it’s already the seventh-largest company globally, and it’s done nothing to prove the space data center thesis. Except for satellite internet and similar ventures, which are impressive, but that’s not why you buy SpaceX.

So I think this is unlikely to meet market expectations. I’m not saying it will fall, but even if it rises 10%, the market’s reaction will be “that’s not enough—I want 50%, 60%, 70% gains.” That will make investors question: as insiders sell more and more, do I really want to buy into Anthropic or OpenAI’s IPO in September?

Pricing it so high creates an almost impossible-to-beat scenario. If it’s a $100 billion company, it can double or triple, and people will say AI is still valid, SpaceX’s surge is because they chose a lower valuation IPO.

But now it’s about maximum extraction—$1.8 trillion. Beating Nvidia? Very, very hard. Sorry Elon, you can’t beat Jensen. I don’t even know who the current CEO of Amazon is, but you can’t beat these companies. They have real revenue, are operational, and have proven their claims. SpaceX’s stuff is still mostly on a napkin.

Maybe time will prove me wrong, but would you really push a $1.8 trillion stock up another 50%? That’s extremely difficult. That’s why I think this will be a major event shaking people’s faith in the AI story—just because it’s so big, it’s almost impossible to go up.

Host Kyle Chasse: So you think liquidity during these IPOs will flow out? Will there be a massive capital shift? Or will it be like Elon—whoever sells first, sells best?

Arthur Hayes: It’s the first. People will get excited, pull liquidity from other assets.

If SpaceX underperforms, I think Anthropic and OpenAI will face huge pressure to lower their IPO prices. If these giants are forced to cut valuations or reduce fundraising before listing, it sets a very dangerous precedent—like the market is cutting its own throat, softly admitting the AI bubble was too big, and lowering expectations in advance.

When expectations are lowered suddenly, people hesitate: why did they lower the price after SpaceX? Why reduce the issuance size? All these changes could cool investor enthusiasm. So, capital might be pulled from other parts of the market, or people might just cool off on the AI bull story and gradually exit, triggering a chain of price declines.

Host Kyle Chasse: Going back to Trump’s anti-AI narrative—some might argue that all those AI giants are actually helping him get elected, or at least influencing him significantly. We know he’s had many private dinners and discussions with them—they’re his big donors and supporters—and he’s publicly supported and praised AI.

Rate Hike Expectations: The Pillar of Rate Cuts Collapsing

I haven’t calculated how many people openly oppose AI, but I know most people don’t have warm, fuzzy feelings about it, so this shift might be quite clever. But I’ve never heard anyone say it outright—that’s a bold prediction. How confident are you? Any signs that make you believe he might go this route?

Arthur Hayes: I still use Perplexity AI; I asked it: Polymarket says Republicans will lose—are there any paths to victory? People need to understand the underlying political logic: why does Trump desperately want to hold the House in the midterms?

It’s not about some noble ideology; it’s purely political self-preservation. If the House is taken by Democrats, he and his entire family will be flooded with subpoenas for two years. Democrats can pursue him relentlessly. He’ll have no chance to create the “second Trump term” legacy he envisions. That’s why he wants to win.

I also believe Trump has no ideology—he only cares about winning. During the 2020 pandemic, he provided the largest fiscal transfer in US history—checks to everyone. No income screening, lots of fraud, rich and poor alike got checks. So I don’t think he’ll turn to naked populism or pandering—because public sentiment is against AI.

AI has triggered negative emotions among both Republican and Democratic voters. So I asked AI: assuming these seat projections are correct, ignoring those safe seats due to redistricting, but they still need to win some more to keep the House.

Then I asked: in all competitive districts within the margin of error, are there any local legislations banning or restricting data center construction? Search all these districts. The result: if Trump turns against AI, he could flip enough seats to give Republicans the House, because in these districts, local residents have already taken action against data centers—they don’t want them in their neighborhoods.

And again, all this is just rhetoric—Trump doesn’t need to do anything. He can call Jensen and those AI giants: “Listen, I’ll crack down hard on you in the next four months, don’t panic. Come November, none of this will happen.” That’s how he operates.

He attacks them, stock prices fall, some people lose money. Look at his tariffs—his hedge fund buddies lost billions when he tried to rewrite US trade infrastructure. He pulled back at the last moment, but at least he tried.

So I see no reason why, if his political strategists see that an anti-AI stance can win enough votes—even just as rhetoric—they wouldn’t do it. The only victims are the stock market, and only wealthy people lose money there. You don’t even have to do anything—just talk. No bills will pass.

After November, it’s back to “We must win the AI race and beat China.”

So I think, given the inflation narrative is already set in stone and unchangeable, this is a viable path for Republicans to win the election. I don’t care if oil prices fall another 50%; gasoline might drop a bit, but supply chain issues are already transmitting higher prices to supermarket shelves by October, and Trump is almost powerless to stop it.

Host Kyle Chasse: Let’s talk about Wosh. I know there’s not much certainty yet, since his first FOMC meeting after taking office is next week. Based on his previous statements and the upcoming midterms, what do you think his policy stance will be?

Arthur Hayes: I don’t remember the specifics of his recent speeches, but one narrative is: you can see through the commodity inflation during wartime, then believe that AI productivity miracles will bring growth without inflation, so you can cut rates. I think that’s the narrative the market wants to believe about Wosh.

The unfortunate reality is, oil prices are higher and won’t come down soon; the two-year Treasury yield is about 60 basis points above the effective federal funds rate. The market is telling the Fed: you need to raise rates. That’s the signal the market is sending to the Fed, whether they act on it or not, I don’t know.

I also think Trump might privately ease his obsession with rate cuts—because if he wants to do something about affordability, the last thing he should do is have the Fed start cutting when inflation is at 3.5-4%. If he really cares about voter affordability, rate cuts would lead to a disastrous midterm defeat.

So I think, considering market positioning, it will be very difficult for Wosh to cut rates. The baseline is he stays on hold; the question is about tone—hawkish or dovish. If hawkish, it signals inflation pressures are building, and the Fed might need to act later; markets will price that in: “They will hike at some point.”

And the bubble’s biggest threat is rising rates—higher capital costs always push people away from the market.

So I think the chance of him cutting rates is very low; most likely, he stays put, and it’s all about language—hawkish or dovish. If hawkish, it indicates inflation is building, and the Fed might need to hike later; if dovish, maybe not.

The Fed’s limited options to support the bubble—oil has already pushed the two-year yield above the effective federal funds rate, with soaring oil prices and widening spreads, yields climbing. I see no room for Wosh to cut. If expectations of rate cuts are your main support for the AI bubble and its continuation, you should question that assumption.

Investment Shift: Energy Stocks Outperform Bitcoin

Host Kyle Chasse: From now until midterms, do you think there will be any events that could give the market a short-term bounce? Not manipulation, but narratives or ongoing developments that might bring some rally before year-end?

Arthur Hayes: Maybe people believe MicroStrategy will keep buying, which could rekindle some bullish sentiment. But I see no signs of money printing, and even if there is, it’s directly flowing into AI construction. So I see no major positive catalyst to lift crypto out of this slump, or at least to outperform AI.

Because if we go back to a perfect economy of high growth and low inflation, what would you buy? Nvidia or Bitcoin? Of course, you’d pick Nvidia—like Samsung—because they’ve gone up 50x in two years. Would you buy Bitcoin? No way. That’s the problem—AI is performing too well.

If the environment remains the same, and these assets keep doing well, why would you choose crypto? You’d keep betting on capital expenditure growing at 100% annually, continuously buying these companies. Do you think that’s sustainable?

And that’s exactly the current market belief.

But if I were an institutional investor, and my client said, “The Nasdaq’s up 50%, why only 10% for you?”—“Because I’m hedging, I bought volatility,”—the client would ask, “Why give my money to a fund that only gained 10%, instead of one that gained 50%?” That’s the logic of everyone trying to maximize returns—everyone’s asking, “Why aren’t you in?”

Host Kyle Chasse: When will you consider re-entering? What could convince you to come back?

Arthur Hayes: If by fall, oil prices are moderate, no big surge, and Trump doesn’t turn against the AI giants, I might re-enter, look for value.

But all that hinges on a very strict precondition—the epic IPOs of SpaceX, Anthropic, and OpenAI must open strongly, even blow out the most bullish gains in history, to match the largest IPOs ever. When reality doesn’t match expectations, we’re in trouble.

Host Kyle Chasse: Is there any way to tell when the crypto market might enter the next bull phase?

Arthur Hayes: We need more money printing, and the new money shouldn’t all flow into AI. When will that happen? I don’t know, but I don’t think it’s happening now. You’ve often said that the only way the government gets itself into trouble is by printing money—that’s inevitable.

Is there a way to estimate this timeline, or a catalyst? If the AI bubble really bursts, some financial institutions fail, then you might get a bailout.

When? I don’t know. But that’s the moment crypto can outperform—AI will be credit-broken, not that it will cease to exist, but it won’t soar like before, and investors will need to trade other assets. I hope that other asset is crypto, and liquidity will flow back into crypto.

I firmly believe the answer is always money printing; the only question is timing. Bitcoin has been the best-performing asset in human history over the past 15 years. But unfortunately, many people didn’t buy at $0.01—they bought at higher prices. If you entered during the ETF era, on average, you’re down. Everything depends on path dependency and timing. Just because you entered six months ago doesn’t mean Bitcoin should have gone up for you. That’s a painful lesson many need to learn.

Host Kyle Chasse: Final quick questions. First, will Bitcoin be above or below $100,000 by year-end?

Arthur Hayes: Below.

Host Kyle Chasse: When will the altcoin season come?

Arthur Hayes: We just went through an altcoin season—just four assets. People made a lot of money on HYPE and some others, so I think it’s over, maybe it will come again, but I don’t know.

Host Kyle Chasse: Do you think you’ll buy HYPE back before year-end?

Arthur Hayes: Yes.

Host Kyle Chasse: If you put $1 million into assets today—Bitcoin, HYPE, short-term bonds, gold—what would you choose?

Arthur Hayes: ExxonMobil.