On September 13th, Arthur Hayes, co-founder and former CEO of BitMEX, gave a presentation on “Money Printing, AI, and Crypto: Fueling an Epic Bull Market Mania” at Token2049 in Singapore.

In this talk I’m going to talk about debt and AI at a macro level, then zoom it down to a micro level and give a brief overview of why I love Filecoin so much. Again, this is my broad framework about the value of cryptocurrencies, i.e., the liquidity of fiat currencies and some of the technology of the ecosystem. Over the past decade, one of these two factors has been the reason for our bull market, but we haven’t seen a bull market where both are happening at the same time.

Now I want to explain why I think the next bull market will likely start in early 2024, which will be the biggest since World War II and the Great Depression, not only in the crypto space, but also in the venture asset space.

Fundamentally, what is GDP? I got this phrase from Robin Paul, which is population growth, productivity, and debt. I want to focus on babies (population and demographics) as well as debt (money printing). The very simple way to put it is that the rich don’t have many children. There are a lot of reasons for this, but if you look at the chart data, we’re actually going into a population growth deficit, and that poses a very big problem, at the end of the day, we’re borrowing from the future, building today, and then hopefully more people in the future will fill that growth so that they can continue to do economic activity.

So who can push this growth to pay off the debt when there are not enough children, and what solutions have the central banks and governments come up with to solve this problem?

How do we keep GDP growing – printing money.

Since 1970, this is the World Bank’s chart on global debt vs. GDP, and we’ve gone from 110% to 360%. The worst part of this chart isn’t just a terrifying 360%, the acceleration is just as chilling. It took us 10 years to increase growth by 100%, and during the coronavirus, it took us just two years to increase it from 250% to 360%.

From a global perspective, we are in the late stages of a debt catastrophe. Why debt is unsustainable is something that each country has its own specific reasons for, but at the global level, we can see that we are compensating for non-existent growth with accelerated debt issuance.

Even though we’re in Singapore, we’re in the dollar system, and most countries’ monetary policies are a reflection of U.S. monetary policy, so I spent a lot of time talking about the Fed and monetary policy.

If you’re a U.S. Treasury holder, this is a very scary chart, and this is the maturity profile of U.S. debt. The U.S. must roll over nearly $8 trillion in bonds by 2026, and they must find people who are willing to accept this debt and the prevailing yields in the market. Now think about it, if the whole world is faced with the problem of too much debt and not enough population growth, how will they do that?

What does the government do when it has a bunch of debt that needs to be issued and no one wants to buy it at an affordable yield?

So if I look at fiat liquidity from a global perspective and from the perspective of the U.S. as a reserve currency issuer, this would be the largest money issuance market we’ve ever seen, but no one of us here would want to buy these things at these yields.

Decentralized storage in the age of AI

Okay, now let’s move from the fiat side to technology. What’s the dominant topic today?

Yesterday I went to a luncheon where there were a lot of global asset managers, family offices, wealth salespeople, and I was around the table to discuss, what was the idea or topic that we were most confident in? I think 75% of people mentioned something about AI. That’s the trend.

The year 2000 is that the Internet will rule the world, an era will always have a major topic, 1929 is radio, railways. Each cycle we focus on some new technologies that will revolutionize the human life experience. AI is no different, and because of the ubiquity of computers and the rate at which human civilization has evolved so quickly since the invention of the Internet of Mainframe Computers, you can understand why investors are so concerned about what AI can do.

Computers can think for themselves, so what will happen to our civilization? There could be trillions of dollars worth that will be created by AI, and Chat GPT has been one of the highlights of the past six months, the fastest adopted technology in human history. Why are all these startups saying that we are going to apply the LLM model in a particular area of the economy to increase productivity for the companies that use our products.

So what does this mean? The biggest stock of AI right now is NVIDIA, which has risen almost 200% since it launched a product that can be consumed by the public, and Nvidia has a price-to-earnings ratio of 100x, which is absolutely ridiculous if you think about it. How much money does Nvidia need to make in 5 to 10 years to get to its current valuation? Some people would say it’s a bubble, and I agree with that, but I think it’s going to get bigger.

So it seems, we have a fiat liquidity bull market driven by a low number of babies and a lot of debt, and we have a tech bull market driven by AI. I’ve written some papers trying to connect cryptocurrency and AI, and basically, I think AI is an individual economic unit that doesn’t care about human laws and regulations if you want to anthropomorphize because governments can’t kill an AI by force. Yes, you can try to wipe out computers and so on, but that will almost destroy the social connections we have. So, I think it’s almost impossible for a single government to unilaterally punish an AI, so, double happiness, we’re going to have pets and AI as a reason why we should own cryptocurrency.

So, what does AI need? AI needs computing power and data storage. When I think about my portfolio and how my family office is getting into AI, I realize that I’ve missed the best time to invest in some of the startups that are rising today. I wouldn’t get liquidity in 2026 or 2027 because it takes five to seven years for a company to mature enough to launch its own product. So I needed to find something that would land right away.

Now, I can buy Nvidia stock at 100x P/E, but I can think about data storage and maybe cryptocurrency-related angles. Some of the people in this room are venture capitalists, and I wouldn’t say you’re fools, but the people who put the money in your hands are probably fools.

So, what’s going to happen next? A bunch of venture capital firms are going to say, I’m going to make an AI fund. So then you have to pay all sorts of fees, right, and then they’ll turn around and see hundreds of billions of dollars invested on any sales pitch with AI.

So, if I don’t want to profit from the AI frenzy, I want to get into the realm where the money goes. That money is going to both of these areas because without these things, whatever AI solution you claim to be is essentially not going to work.

Why does AI need decentralized storage? If I believe AI doesn’t use a lot of data storage, shouldn’t I use Amazon? You put your data in a centralized company that can shut down your service because of a government order, can change the price at any time because that’s their data center, and it can cancel the contract at any time. What does AI do? Will it go to court and sue somebody? It’s not going to happen. Fundamentally, AI will create an opportunity for decentralized storage.

So, now I need a shitcoin, I want to have a listed token to buy, this token has completely collapsed, down more than 90% from its all-time high in 2021, and the most aggressive sellers have all sold it off, so that when this token starts to rise, it still has a lot of room to grow, it doesn’t take much money to get into it to make this token go up for 10 or 20 years, and it also needs to be related to the AI industry chain.

Selected Filecoin

Filecoin is considered a worthless virtual currency, falling from a peak of $300 to a current $3, a drop of nearly 99%, however, people are still using it.

There’s data on the Filecoin network, real customers using the system, and there’s a lot of room for the market to grow. Although AWS is the market leader, it is a centralized solution. If end-users value the benefits of data decentralization, then there is room for the decentralized storage market to grow.

I’ve invested in a Filecoin storage platform called Seal Storage, which is helping bring large data users to the Filecoin network. They have a project called Atlas, which is a data project of the European particle accelerator CERN. They’re using SEAL to reduce data costs, and SEAL earns Filecoin rewards for putting that data on the network. The University of California, Berkeley, is also doing something similar with SEAL, which also has collaborative projects with NASA and a number of other universities in the United States.

Hopefully, I’ve briefly laid out why I think Filecoin is going to go up so much. I hold Filcoin.