Arthur Hayes Podcast Transcript: Aptos Will Surpass Solana, Dogecoin ETF Will Launch in Bull Market

Compiled by: Wu Says Blockchain

Recently, Coin Bureau invited Arthur Hayes and Raoul Pal for an in-depth conversation discussing market risks, aggressive investment strategies, and annual predictions. Arthur emphasized the strategy of holding Bitcoin and altcoins, sharing their family office's success with the Ethena project and the liquid staking token ecosystem. Raoul shared his investments in Solana and high-end NFTs, pointing out that doing nothing is the best strategy this year. Additionally, they explored the cultural value and market potential of memecoins, predicting that Dogecoin might gain an ETF, and discussed the impact of the U.S. elections on the market and potential risks ahead.

Note: The opinions expressed by Arthur in this article are highly subjective and do not represent Wu Says' views. Readers are advised to invest cautiously and strictly adhere to the laws and regulations of their respective locations.

Podcast:

https://www.youtube.com/watch?v=0cX1Huf89PE

Investment Strategy Sharing: Hold Firm, Don't Be Afraid; Doing Nothing is the Best Move

Arthur: My investment strategy is to hold, not sell, not get scared, and not use too much leverage. It's actually quite simple; everyone knows what they should do, but we usually don't do it because YOLO (You Only Live Once) is fun. But in the end, it's simple. If you believe that central banks and governments are heavily in debt, will continue to incur debt, will keep printing money, and will continue to distribute benefits for votes or public support, then cryptocurrency is the answer. Obviously, Bitcoin is the veteran, and I hold a lot of Bitcoin. Then, when you enter the risk curve and want to increase potential returns, you enter the altcoin space.

Clearly, for our family office, the standout project is Ethena, whose team has excelled in creating synthetic dollars with the intent to replace Tether and USDC. Ethena's current circulation is about $3 billion, making it the fourth-largest dollar stablecoin. I think this is the best thing we've done this cycle, and I believe we are just getting started; Ethena's impact on the ecosystem is just beginning. Then, the second highlight might be Ethereum and the entire liquid staking token ecosystem. Clearly, EigenLayer will launch later this year. We have many other investments in that vertical. So I would say these are the two standout highlights of our portfolio this cycle.

Raoul: Doing nothing is the best move. You know, 90% of my position is in Solana, which has been the best choice so far this cycle. The only meaningful move this year was when Solana went from $150 to $200, I partially sold at the high and started buying high-end NFTs. I bought almost every Beeple piece I could find, and then I bought all the X Copy pieces I could afford, building a long-term investment portfolio. These pieces were priced very low at the time, and my view is that the market cap of this space will go from the current $2.5-3 trillion to $10-15 trillion by the end of this cycle, reaching $100 trillion by 2032. From now on, that will be a $97 trillion wealth accumulation, the fastest wealth accumulation in history. If I'm completely wrong, it's still a $50 trillion wealth accumulation. That's equivalent to the entire historical market cap of the S&P 500. So, a lot of wealth will be generated in this space and circulate within it.

People will buy high-end real estate, but many won't leave this space; this wealth will circulate within it, whether through venture capital or opportunities to build applications. But in reality, people will pursue those symbolic assets. So I've been buying as many symbolic assets as possible because I believe this is the last chance to buy these things at this price.

What is the "Banana Range"? What Impact Does It Have on Cryptocurrency?

Raoul: We are entering the "Banana Range." The "Banana Range" is a concept that Arthur and I often discuss. It's a highly cyclical phase when liquidity enters the market, and central banks need to refinance all debts, sweetening the deal for the people. At this time, cryptocurrencies typically skyrocket. This is driven by macroeconomic forces during a debt refinancing cycle that affects all asset prices, but cryptocurrencies perform particularly well. So the simplest approach is not to mess it up. Maintain a core portfolio with most asset allocation in major cryptocurrencies. If you can get it right with other assets, you can make a lot of money in that 10-20% of the portfolio, which carries higher risk but also higher returns.

Looking back at the classic "Banana Range" of the last cycle, Solana, Avalanche, Luna, and Matic all performed excellently during this phase. Within a year, these four tokens had astonishing performances. We will see this situation repeat. Who will it be? I don't know yet. But that's part of the game of the "Banana Range," and it's one of the fun aspects because you can take risks and feel like you've truly seized an opportunity, while in reality, most of the time, you're just watching.

Why Are Memecoins So Popular? What Value Do They Hold?

Arthur: I believe memecoins will continue to exist and will become even crazier as more money is printed. I often visit Singapore, which is a small place with a very homogeneous society. Every time I walk through the shopping area on Orchard Road, I always see local Singaporeans queuing at Chanel, LV, Gucci, and other mainstream big brands. They are always in line, waiting to go in and buy what they want, with prices reaching thousands of Singapore dollars, and they do this often. So if people are willing to queue to buy leather goods with the LV logo, they will definitely sit in front of their computers trading any hot memecoin.

Because you don't need to understand cryptocurrency, just like you don't need to understand fashion. People like it, I like it; it's very human. So I think memecoins will stick around, and for newcomers to the cryptocurrency space, this is the easiest thing to understand. Oh, this is a cool picture; this is a funny joke I understand, and everyone is in on this joke. I can make money through the spread of this joke, okay, I'll buy this memecoin.

I don't need to understand all the underlying technologies like blockchain, AI, and cryptography. I just need to know if it's a cool cultural trend. In real life, I'm already doing the same thing when I queue for hours to put some logos on my chest while buying these expensive brand products. So I think observing human behavior is key; why do the wealthiest people in the world, if you look at the rich list, many own luxury brands? Memecoins are the luxury brands of cryptocurrency. It's easy to participate because you don't have to wait in line. You just need to buy online, assuming Solana's system works properly. In short, you can quickly purchase these things on decentralized exchanges. So I believe memecoins are the luxury brands of cryptocurrency, and that won't change.

Raoul: Yesterday, I had coffee with Miao from Jupiter, and we talked about this. The interesting thing about memecoins is that their utility is either zero or very small. Bonk has some utility, Shiba Inu has some utility, but their real cultural value lies in the attention they garner. Attention is upstream of everything, and that's very easy to understand. You don't need to value them; you just need to know if they can attract attention, whether that attention is lasting, and whether owning them gives me some feeling or status. This is the same as an LVMH Louis Vuitton handbag, the same as fine wine, and the same as the memes you share on the internet. These are all concentrated attention.

Share This Year's Market Operation Strategies and Future Market Predictions

Raoul: I basically haven't done much trading; I simply don't have the time. If you notice, many aggressive trades are basically based on attention, and I don't have enough attention to allocate because I'm too busy. So I maintain a relatively simple strategy. I have Bonk and Doge because I still believe Elon will do something with Doge, and that's it. I'm observing this space; everyone reads Ansem's tweets trying to figure out what's happening, but I simply don't have enough attention to focus on these things. So you actually need a certain level of knowledge to operate in these.

Arthur: My leisurely life includes running around the court playing tennis or skiing on the slopes. So I also don't have the attention to focus on which dog coin is the hottest. I also hold some Dogecoin; I believe Dogecoin will gain an ETF before the end of this cycle because it is the earliest memecoin and is traded on Robinhood. For institutions considering entering the cryptocurrency space, they will apply ETFs to anything with a high market cap and a long existence, and Dogecoin is one of the earliest memecoins.

What Are the Chances of Dogecoin Gaining an ETF?

Raoul: Last week, I spoke with Yan from VanEck, and I told him that you must apply for a Dogecoin ETF. He said he just wants to make sure he doesn't end up in jail first. I said, you're fine; Dogecoin has been around for a long time, and it has outperformed Bitcoin in every cycle, which is quite remarkable. So I'm working behind the scenes to push this, but I haven't convinced Yan yet. However, I will keep trying. One of Hunter Horsley or Yan will cross that line. It's unlikely to be BlackRock, but we will try.

Which Memecoins Might Succeed?

Arthur: In terms of the memecoin narrative, I think many memecoins are too specific. Some political memecoins might be interesting for a moment but lack lasting cultural value. When you talk about memes like dogwifhat, it resonates with Koreans, Chinese, Americans, or Argentinians alike. But if you talk about American politics, first, you might offend half of Americans, and second, 95% of the rest of the world will think it doesn't concern them. Therefore, I believe many memes are too specific and won't resonate globally. So if someone can create a global memecoin that doesn't offend anyone, is inclusive, and is fun, it will succeed.

Raoul: This is actually a good place to test narratives, in Singapore, because it has a culturally diverse Asian audience that loves to gamble and also loves memecoins. They are big buyers of Dogecoin and other dog coins. You just need to see if this narrative resonates here; they don't care about Trump and American politics; they just want something that can cross cultural boundaries.

How Might the U.S. Elections Impact the Market? How to Protect Yourself and Take Advantage of Market Volatility?

Raoul: My view is that there isn't much impact.

Arthur: Actually, the candidates are all the same; they all have a group of stakeholders supporting them. After the election, they will continue to print money, so whether it's large-cap tech stocks or cryptocurrencies, they will continue to perform well. There may be some volatility, especially regarding Trump's legal issues, but ultimately, no matter who is elected, they will print money. So I don't think this will have much impact. They will all vote to support the war budget. The U.S. economy exists for war. So it's all the same; the difference is which candidate you prefer. I don't care what their slogans are; I just know they will all print money, so any investment strategy that works now will continue to work after the election.

Raoul: If there is any volatility, it might be because one of the candidates drops out or a violent incident occurs. But the end result is still printing money. So, the U.S. election year and the year after are usually very positive for risk assets because everyone is buying votes.

Arthur: The Federal Reserve is no longer independent. It's a false proposition. In reality, the Federal Reserve is led by the Treasury, and Janet Yellen is the most powerful person. She can do whatever she wants, while Jerome Powell is essentially powerless. The Treasury is the driving force, and they have been operating behind the scenes. If you look at some of the Federal Reserve's research papers, like a recent one from the Atlanta Fed on central bank swaps, they have basically been supporting international dollar borrowers, detailing every instance where the Federal Reserve printed money and handed it to foreign institutions.

Raoul: If you look at Arthur's perspective, there is indeed a dollar shortage globally. We have lost some banks in the U.S. and a giant bank in Switzerland, and the dollar shortage issue is becoming more severe. Yellen has been to China twice, and her mission is to sell bonds. China is willing to buy bonds, but they don't have dollars, so we need to find a solution. The G20 or G7 meetings will have some arrangements to ensure there is enough dollar liquidity in the global system. So since 2008, there hasn't been much independence. In fact, there isn't much independence among central banks either; the Bank of Japan and the Treasury ceased to be independent in the 1990s.

What Are the Main Risks in the Current Financial System and the Cryptocurrency System?

Raoul: For me, there is one risk that is not so obvious. I think the biggest risk is the emergence of an absurd bubble within the next three years. There could be a bubble similar to that of 1999, leading to excessive market expansion followed by a significant correction. This is the biggest risk.

Arthur: The biggest risk in the last cycle was the emergence of credit issues with centralized counterparties. Typically, the problem in the crypto space is that we like decentralization, but to make money, we do centralized things, and as a result, these centralized entities eventually explode because their business models are incompatible with decentralized assets. This situation has happened repeatedly. So how might this cycle evolve? What centralized entities do we trust and push the market now? ETFs, fund managers, what do they do? Custody their assets, which may only be with Coinbase and a few banks. If one of those regulations passes, we will accumulate hundreds of billions or even trillions of dollars in crypto assets, custodied in fewer than 20 companies, and those companies may be custodied in fewer than 5 institutions.

If you've ever worked in a bank, you know that those who make the least money often have the most important jobs, handling foreign exchange reconciliations or ensuring stock settlements in the background. If you consider the custody of crypto assets in a traditional financial institution, they now want to enter this space because they see Coinbase making a lot of money from BlackRock and others, and regulations force you to use third-party custody. So they might force you to custody with large institutions like Bank of New York Mellon. So now you have a lot of crypto assets in these companies, and the people handling these tasks might be someone making $50,000 to $60,000 a year, overworked, disrespected, and completely unaware of cybersecurity. It's not their money. If I were to hack cryptocurrency, I would target these U.S. custody banks because their cybersecurity is an afterthought. They have no idea what they are doing because they have never custodied such assets. If they lose these assets, they can't ask the Treasury or the Federal Reserve for a bailout. In cryptocurrency, no one can create Bitcoin or Ethereum to compensate for your losses. So if I consider risks, this is a 2 to 3-year risk; I would say a major crypto custodian gets hacked, losing $50 billion to $100 billion in cryptocurrency, and that would be the end of the cycle.

Raoul: And it's unlikely to be Coinbase because they know the rules of the game. But other new entrants, they don't understand the complexities of these assets. Another risk for me is the derivatives market; the entire cryptocurrency options market is almost concentrated in one derivatives exchange. This poses a risk because a large number of people use this single centralized platform for options trading. If this exchange has issues, we could face significant problems. We need more options exchanges and platforms to diversify risk because the use of derivatives is increasing, and we don't know who will ultimately bear the risk when the market explodes.

Arthur: In terms of options, there's an interesting phenomenon where zero-day options are very popular. Strangely, the CBOE (Chicago Board Options Exchange) has resisted launching zero-day options for years because they can't achieve real-time margining. When you sell zero-day options, you essentially take on unlimited upside risk. Despite strong demand from brokers to launch these products because they are very profitable for retail clients, the CBOE has not launched them. Imagine if they launched zero-day options for Bitcoin or Ethereum, and Bitcoin skyrocketed 50% in a day; all the market makers would be forced to margin during the day, and the CBOE would be completely unprepared for that. This could lead to a market crash.

Raoul: These are not predictions; just a clear understanding of the potential risk points we see, not saying any specific company will definitely fail. At the end of every cycle, someone always blows up; we just don't know who it will be. If you leverage an asset with a volatility of 70%, you are guaranteed to blow up; that's a hundred percent certainty.

What Are the Undiscovered Treasure Investment Opportunities? Which Projects Do You Have High Hopes For?

Raoul: I try not to do much. One phenomenon I've been observing is the Bitcoin to Ethereum exchange rate. If this rate starts to rise, it might indicate the beginning of altcoin season. So my focus is on the "Banana Range" because that's where you can make big money. So even if you do nothing, you don't want to lose your tokens in this range.

Arthur: I think Aptos could become the second-largest Layer 1 and surpass Solana in this cycle. This prediction has a 1 to 3-year timeframe, and I will provide more details this September.

Raoul: I have a different view; I work at the Sui Foundation, and I think the Move protocol is a big narrative. We can discuss this in the future. I'm also very interested in this upcoming round of major Layer 1 projects because trades in the "Banana Range" are very profitable. In the last cycle and previous cycles, these trades generated huge returns, so it will be the same this time. Most of these tokens have already rebounded from their lows. They all launched at inappropriate times in the last cycle, but the current market environment is very favorable for some of these tokens. I'm not sure which specific projects, but you might consider projects like Celestia, Monad, etc.