Arthur Hayes: Almost zero trading in Q1, the AI unemployment wave and the Iran war have kept me on the sidelines

Original Author: Arthur Hayes

Original Translation: Shenchao TechFlow

Introduction: BitMEX founder Hayes rarely admits that he hardly traded in the first quarter. He believes the market is standing on the edge of two cliffs: AI will destroy the jobs of white-collar workers in the U.S., leading to a deflationary collapse, and the war in Iran could completely rewrite the dollar's hegemony. Bitcoin may drop first, but ultimately it will outperform all mainstream assets.

(This article only represents the author's personal views and should not be used as a basis for investment decisions, nor should it be considered investment trading advice.)

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Because the Maelstrom fund had very light trading in the first quarter, many brokers occasionally contacted me to ask for my views on the market and what they could do for us. My answer was, "This is an untradeable zone." Aside from slowly increasing our long positions in Hyperliquid, we hardly made any trades in the first quarter. Two factors combined created a trading dead zone, at least for our pure long positions.

The surge of AI agents will destroy the job prospects of ordinary knowledge workers in the developed economies of the West (mainly the U.S.), leading to a deflationary financial collapse. I wrote about this topic in "This Is Fine." Since that article was published, to turn Iran into the latest dumpster fire, U.S. President Trump, with the support of Israeli Prime Minister Netanyahu, launched a selective war against Iran. The war has lasted nearly seven weeks, and the only important question is how the flow of goods and commodities through the Strait of Hormuz will be arranged.

I always declare when expressing views on war or geopolitics that I am just a simple skiing enthusiast and a crypto player who dances to house music. I have no insider information on what wars or global leaders will do. But I can read mainstream propaganda narratives and use AI agents to perform simple calculations with publicly available information. I try to filter out the noise and focus on what matters for my portfolio. Fortunately, I do not live in the Levant or the Middle East, so my life and freedom are not at risk.

In my simplified worldview, there are three scenarios to consider; actually four, but the fourth, nuclear war, is uninvestable, so there's no need to write about it. I will present each one and then delve into how they might affect Bitcoin prices. I do not know the probabilities of each scenario. But what I want to figure out is whether there is a portfolio configuration that can outperform hydrocarbons and their derivatives like food and fuel prices in the best case, and in the worst case, although underperforming hydrocarbons, can still outperform all major asset classes.

Scenario One: Return to Normal

In this scenario, the war ends immediately, and the pre-war status quo is restored. However, the long-term trend of replacing expensive digital symbol-manipulating knowledge workers with cheaper, more efficient AI agents continues. The U.S. economy is most vulnerable because about 70% of its GDP is driven by consumer spending. Consumers finance materialistic consumption with bank credit, and these loans become assets on the banks' balance sheets. If ordinary knowledge workers lose their ability to repay, these banks will effectively become insolvent and will require massive money printing from the central bank.

Scenario Two: Tehran Toll Booth

In this scenario, the U.S. military is unwilling or unable to stop Iran from restricting ships passing through the Strait of Hormuz. Iran fulfills its promise to allow "friendly" ships to pay 2 million RMB, cryptocurrency, sanctioned dollars, or other diplomatic arrangements to pass through the strait. The worst-case scenario for U.S. financial hegemony is that countries now have to find ways to obtain RMB. Given that most countries have a trade deficit with China, the only way to raise RMB on a large scale is to sell dollar assets (such as U.S. Treasuries or U.S. tech stocks), buy physical gold, and then sell the gold for RMB through the Shanghai or Hong Kong gold markets. Among the top ten economies by GDP, only Brazil and Russia have a trade surplus with China, ranking ninth and tenth respectively. In contrast, the U.S. has the largest trade deficit of all economies, financed by an equally large capital account surplus. However, when countries sell dollar assets to raise RMB or buy commodities at extremely high prices in the spot market to cover shortages, the empire's capital surplus will mathematically decline. A financialized U.S. economy needs foreign capital to finance government spending; without it, the numbers won't add up. Ultimately, falling bond prices or rising yields and declining stock prices will require money printing to finance the government.

Scenario Two Point Five: Stars and Stripes Blockade

Interestingly, after U.S. and Iranian negotiators failed to reach a permanent ceasefire agreement, on Sunday, April 12, Trump announced that the U.S. Navy would blockade all ships entering and leaving the strait. Perhaps this blockade will evolve into a highwayman toll, where ships must pay double tolls to both Iran and the U.S. rogues, while shouting "Allahu Akbar" and "Hallelujah