BitMEX co-founder Arthur Hayes said that Bitcoin’s The recent 52% plunge from October’s all-time high is sending a major warning signal — but the cryptocurrency could eventually soar to new records once the Fed responds to what he sees as a looming AI-driven banking crisis.
In his latest article, “That’s Good,” Hayes noted that Bitcoin’s differences from traditional tech stocks reveal its role as a “global fiat liquidity fire alarm.” While the Nasdaq has remained relatively flat, Bitcoin has plummeted from $126,000 to currently $67,000, reflecting what Hayes said is a massive credit destruction event that the stock market has yet to acknowledge.
“Bitcoin is the most responsive freely traded asset to fiat credit supply,” Hayes wrote. “The recent divergence between Bitcoin and Nasdaq sounds the alarm that a massive credit disruption is imminent.”
Hayes modeled a scenario in which AI replaced just 20% of the 72.1 million knowledge workers in the United States, triggering an estimated $557 billion in consumer credit and mortgage defaults—roughly half the severity of the 2008 financial crisis. He predicted that this AI-driven onslaught would devastate regional banks and force the Federal Reserve to engage in “the largest amount of money printing in history.”
“Deflation is bad, but ultimately good for fiat credit-sensitive assets like Bitcoin,” Hayes said. “First, the market prices in the impact…and then…monetary officials panic and hit the ‘Brrrrr’ button harder than I would have to shred a prisoner of war the morning after a meter dumped.”
Hayes pointed to gold’s recent rise, especially relative to Bitcoin, as another red flag, saying, “Gold’s surge coupled with Bitcoin’s plunge clearly tells us that a deflationary, peacetime, safe-haven credit event in the United States is brewing.”
Hayes said that once the Federal Reserve intervenes with emergency liquidity measures – similar to its response to regional bank failures in March 2023 – Bitcoin will “decisively recover from the lows” and expectations of continued money printing will push it to new all-time highs.
That doesn’t mean there won’t be more pain in the foreseeable future, Hayes said. He warned that Bitcoin could fall further before the Fed takes action, potentially falling below $60,000 as political failure delays the central bank’s response. He suggested that cryptocurrency investors should stay liquid, avoid leverage, and “wait for a clear signal from the Fed that it’s time to abandon the dirty fiat currencies and ape them into risk assets.”
