Compiled by Wu Blockchain

In this interview, Maelstrom's Chief Investment Officer and former BitMEX CEO Arthur Hayes shared his views on the cryptocurrency sector, covering the influence of South Korea, potential regulatory changes under the Trump administration, and the evolving dynamics of the global financial markets. Hayes emphasized the significance of South Korea as an important Altcoin market, highlighting its active trading culture and high technology adoption rate as key supporting factors. He also discussed investment strategies, meme coins, and macroeconomic trends that could shape the cryptocurrency landscape, predicting that the bull market will continue driven by global inflationary policies. While expressing skepticism about the U.S. government directly adopting Bitcoin reserves, Hayes believes the transition to digital assets is inevitable.

Hikaru: Arthur, how have you been?

Arthur: Very well.

Hikaru: Great, I'm glad to have you here for this interview. We'll discuss three main topics today: first, your background; second, the potential impact of the Trump presidency on cryptocurrencies; and finally, your current views on the market, especially the Korean market. I'm really looking forward to it! So to start, could you briefly introduce yourself and Maelstrom? I'm curious, what has motivated you to continuously strive and pursue your passion?

Arthur: I studied at the Wharton School of the University of Pennsylvania, and came to Asia in 2008, working at Deutsche Bank and Citibank, gradually developing a strong interest in the financial services industry. After working there for five years, I was unexpectedly fired from my position as an ETF trader, and that's when I discovered the Bitcoin whitepaper and started getting involved in cryptocurrency trading. Subsequently, in 2014, I co-founded BitMEX with two other co-founders. After stepping down as CEO in October 2020, I realized that I enjoy trading but not running a company, so I decided to create my own family office, which is the origin of Maelstrom. We are an early-token fund, using my own capital for investments. Our goal is to outperform Bitcoin and Ethereum through investing in promising projects.

Hikaru: Wonderful! You mentioned BitMEX, which is very well-known for pioneering derivatives and perpetual contracts in the cryptocurrency space. As one of the founders of BitMEX, how did you transition from BitMEX to now serving as the CIO of Maelstrom? What are the differences between the two, and which one do you prefer?

Arthur: Managing a small company, which in my view means a team of less than ten people, is indeed quite interesting. The early development of BitMEX was very enjoyable. With the widespread adoption of perpetual contracts in 2018, we grew rapidly into a larger company, with the number of employees increasing to around 250. But as the CEO, my daily work mainly involved human resources, legal, and compliance issues, which were not the initial reasons I entered the cryptocurrency space. Fortunately, I no longer have to deal with these things, and I only participate as a board member. At Maelstrom, I can focus on trading, investing, and conceptualizing, and work with a small team of about six people. This is what I truly love - financial markets, cryptocurrencies, and understanding new projects to drive decentralization.

Analysis of Cryptocurrency Regulation and Macroeconomic Trends in the Trump Era

Hikaru: Wonderful, I think that's why all of us working in the cryptocurrency industry are so passionate. Now, let's talk about a topic that everyone is very excited about, which is the incoming Trump administration. It is predicted that they may implement more crypto-friendly regulations, such as appointing a new SEC chair (farewell to Gensler), and even approving more Altcoin spot ETFs, such as the rumored Solana and Ripple. So, I'd like to ask, given this situation, what changes do you foresee in the U.S. cryptocurrency market and the global financial markets over the next four years?

Arthur: I believe we are gradually entering a phase where those holding government bonds will realize it is a terrible investment, as all major governments around the world will have to print money and drive inflation in an attempt to reduce their massive government debt through inflation.

This is not just a problem for the U.S., but all major countries like the EU, Japan, and China are facing the same dilemma. And whether the politicians are democratically elected or not, they cannot accept austerity policies. We clearly see the example of Argentina's Milei, who claimed he would cut the government budget and balance the books, and was elected on that platform.

However, when he tried to do so, the Argentine economy performed very poorly. I remember industrial output declined by around 20%, which is a staggering number. Because when you remove all the credit from the system and reduce government services, people lose their jobs, as there is no money flowing into the system. I don't think any politician, whether democratically elected or not, is willing to govern an economy like Argentina's. So they choose to reduce debt through inflation, and this is what Trump will also do.

What people haven't noticed is a major policy, which is that he has to print money. He needs to grow GDP through inflation to the point where it can support the government's balance sheet. I know many people are focused on cryptocurrency regulation and its potential direction, but I think predicting crypto-friendly regulations in the U.S. is highly speculative. Because there are many wealthy individuals who hold a lot of crypto assets, and their businesses may benefit from the regulations. They will play the same game as the big banks, like donating to the winning party, getting into the government, and crafting regulations that favor themselves, not necessarily the overall interests of cryptocurrency holders.

We may get a new SEC chair, but that person may choose to go after everyone except Coinbase, and we can't be sure. So I think the high expectations of the U.S. crypto regulations driving adoption are reasonable. But market expectations are usually higher than reality. In fact, Trump is a politician, and the U.S. Congress will be re-elected in two years. So he has at most 18 months to take action. In addition, he needs to fulfill his campaign promises, not just in the crypto space. Therefore, I think this will be a "buy the rumor, sell the fact" situation, and any policies he introduces may be positive in the long run, but may not be ideal in the short term.

So if you're getting into cryptocurrencies solely because you think Trump will implement positive crypto regulations, you may be greatly disappointed. However, I don't think the crypto market will crash because of this, as the real key point is the amount of money the Treasury's Scott Bestant needs to print to achieve Trump's economic goals.

Discussion on the Feasibility of a U.S. Bitcoin Reserve

Hikaru: Okay, that's a very realistic perspective. It's a bit like how many token projects will release a nice whitepaper describing a grand vision, but the final result is just an MVP. This is an important fact that people need to understand. I completely understand that the U.S. and the Trump administration may have various possible directions in cryptocurrency regulation. But there is a particular topic about the U.S. national Bitcoin reserve. Assuming the U.S. government does launch a Bitcoin reserve program, this strategy of programmatically capping the total supply, how do you think this would impact the U.S. government and the broader financial markets? What actions might other national governments take?

Arthur: First, I don't think a Bitcoin reserve will actually materialize. But I think the path they're trying to take to achieve this goal is highly instructive and generally positive for risk assets. If you've read Senator Lummis' draft bill on a Bitcoin reserve, the most important part is how she plans to fund this reserve. She proposed two ways, where the U.S. government can either purchase Bitcoin and establish a national strategic reserve, or...

The first approach is for the Federal Reserve to return the interest income it earns from government bonds and mortgage-backed securities to the Treasury Department. This amounts to tens of billions of dollars per year. Therefore, she suggests using these funds to purchase Bitcoin. However, the amount is small, especially as the Federal Reserve is reducing its government bond portfolio and also has losses in other parts of its balance sheet. So I don't think this will contribute much to Bitcoin purchases.

More importantly, she suggests reassessing the value of the government's gold holdings on the U.S. government's balance sheet. The U.S. government currently holds about 80,100 metric tons of gold, priced at $42.22 per ounce, the level set by Franklin Delano Roosevelt in 1933 by weakening the dollar. If the gold is revalued at the current price of about $26,000 per ounce, this would generate about $700 billion in accounting profits for the Treasury Department. Therefore, the Treasury Department could use these funds to implement government projects or to purchase Bitcoin for strategic reserves.

But if I were a politician, I could revalue the gold, create this "virtual" money, and use it for my constituency projects, support the Green New Deal or oil drilling, rather than purchasing Bitcoin. Although I believe the U.S. government will devalue the dollar relative to gold, I don't think they will use these funds to purchase Bitcoin, but rather for other government projects. Trump doesn't need to go through Congress, nor cut spending, just have the Treasury Department readjust the gold price, say to $5,000, $10,000 or $20,000 per ounce. This automatically creates funds that can be used for various political expenditures.

So, I think the inspiring part about the Bitcoin strategic reserve is that it is a way to rationalize the process of revaluing gold, releasing accounting profits for the Treasury, and using them for expenditures.

Maelstrom's Investment Strategy: Focusing on Value and Timing

Hikaru: Very interesting. It's clear that this strategy may differ somewhat from the mainstream consumer's thinking, but it will ultimately have a positive impact on Bitcoin's price, so let's wait and see.

Next, I'd like to discuss another topic. I believe many people are very interested in your investment and trading strategies, so I'd like to ask you about that. What are the main criteria you focus on for trading or even long-term investing in digital assets?

Arthur: First, I require Akshat Vaidya, who is responsible for investments, to outperform the returns of Bitcoin and Ethereum. At Maelstrom, I employ many people, and I could just invest my money directly in Bitcoin and Ethereum and see what happens. So, if we're going to actively invest in other projects, they must be able to outperform these two cryptocurrencies.

We try to capture cycles. I'll have a macro liquidity perspective, and this will also feed into Akshat's investment considerations. For example, during the bear markets of 2022 and 2023, we were very active and got a lot of extremely valuable deals. Obviously, as more capital flows into the crypto space, prices rise, and valuations become very expensive. So, we've slowed down our investment pace. We are very focused on the entry price of a project, because price is what you pay, and value is what you get.

We can't predict the future, but we know that if we can get into a token project at a very reasonable fully diluted valuation, even if the project ultimately performs poorly, as long as the token launches, we can still profit. But if we pay too high a valuation in the bull market out of fear of missing out, even if the project succeeds, by the time the token launches, we may not be able to make money. So, we are very focused on the investment price. Next, we look at whether the project fits into a vertical that we're interested in. But I always emphasize that the primary investment criterion is that the price must be cheap. Because if the price is low, we have more room for error in terms of the technical prospects, the team's market fit capabilities, or the time frame.

Hikaru: Very clear. This "high fully diluted valuation but no circulating tokens" strategy is obviously not viable in this cycle. So, ensuring a reasonable entry price, rather than paying too high a price in the bull market, is indeed important.

Arthur: Yes, we all tend to get excited and end up losing money.

Hikaru: Even with experience, it's easy to act too quickly due to the fear of missing out. Now, I'd like to discuss a topic related to South Korea, which is our local market. I've noticed that Maelstrom has recently launched an official blog and has been publishing a lot of Korean content. I'd like to ask what prompted you to enter the Korean market? What sparked your interest in Korea?

Arthur: I first noticed the Korean market around the 2017 ICO boom. At that time, the token trading prices on Korean exchanges were 20%, 30%, or even 50% higher than other places, with Bithumb being the dominant player. Reminiscing about my days as a derivatives trader at a bank about 10 to 15 years ago, the KOSPI options in Korea were the most liquid options market globally, even though Seoul's population was only 20 to 30 million. Korea's per capita trading activity is probably the highest in the world.

Now, Koreans have shifted from speculative stock options trading to cryptocurrencies. They have a high level of internet penetration, an educated population, and relatively rigid upward mobility channels in Korean society, from the middle to the upper classes. Some large companies and family-owned conglomerates control most of the resources, and it's difficult to move up just through intelligence or education. So, cryptocurrencies provide a completely new opportunity for these high-quality individuals who are dissatisfied with the lack of social mobility. As a result, Korea has become the global market with the highest per capita cryptocurrency trading volume.

When I was at BitMEX, I noticed that Korean users had very strong trading volumes. So, in the current investment landscape, we want to be closely connected to the regions with active users. Although there is technological innovation globally, the real users are mostly concentrated in Northeast Asia and Central Asia. If you want to understand where there is large-scale cryptocurrency trading, you need to focus on these regions. Therefore, we decided to start with Korea, building a local language blog, with industry professionals translating my English content to make it easily accessible for ordinary Korean crypto investors. This is why we want to enter this market, because from a pure cryptocurrency trading perspective, it may be the most important market globally.

Korean Cryptocurrency Regulation and Potential Institutional Participation

Hikaru: I completely agree. If you look at Upbit, for example, it ranks among the top global centralized spot exchanges by trading volume, second only to Coinbase and Binance. This does demonstrate the popularity of the Korean market. And the "kimchi premium" is a real phenomenon. Earlier this year, during the mini-bull run, Bitcoin prices on these exchanges were as much as 20% higher. Additionally, Koreans have shown great enthusiasm for tokens like Dogecoin and Ripple. So, I believe the market is very hot and will continue to grow as more cryptocurrency regulations are introduced, which will provide clearer rules for exchanges and consumers. I'd like to ask, how do you see the future of the Korean digital asset market? How might the market landscape change with more regulations in place?

Arthur: If I'm not mistaken, Korea is currently voting on a tax law. I've heard this law mainly addresses capital gains tax and cryptocurrency-related taxation. It sounds like this law may be delayed, as Korea has a very high proportion of cryptocurrency traders, who obviously don't want to pay high taxes on these trades. If a tax policy is ultimately implemented, it will need to be done in a way that doesn't significantly suppress trading volume. So, I'm very curious to see what the politicians will decide today (around November 26th).

Additionally, I think an important question is whether Korean institutions will participate in cryptocurrency trading. Currently, I understand that only individual accounts can be opened on Korean exchanges, with no access for corporate accounts. If these institutions are able to participate in the future, for example, by leveraging the market's high liquidity and activity to provide services to the millions of Koreans holding cryptocurrencies, this would create huge demand. Furthermore, if Korea allows foreigners to open accounts in their own names, it will attract more external liquidity into the Korean market, helping to balance the price premiums caused by the excessive hype of certain tokens.

Due to the large base of cryptocurrency supporters in South Korea, politicians who may try to restrict cryptocurrencies for the benefit of traditional finance seem to be concerned about losing the votes of the young, active cryptocurrency community. Therefore, I believe this is an educational case that shows what happens when a young, active, and increasingly wealthy group of cryptocurrency holders begins to exert their political influence. This situation may become a microcosm of other regions globally. The younger generation and cryptocurrency asset holders will try to push for regulations that serve their own interests, not just the regulations that existed before they were born for traditional asset classes.

Insights on Meme Coins and Their Speculative Nature

Hikaru: You mentioned a very interesting dynamic, especially with the Terra Luna collapse in South Korea. Many lawmakers realize that digital assets are the future, but the key is how to cautiously take these steps. Education is very important, and ensuring that events like the Terra Luna collapse do not happen again is equally important. So they are very careful in the process of moving forward, not just for the next few months, but for the next few decades. This is indeed a good point. Now, I'd like to switch to an interesting topic: What is your favorite meme coin?

Arthur: My favorite meme coin? Of course, I'll only talk about what I own. I like GOAT, which is a meme coin created by a Truth Terminal AI agent. I think this is one of the first meme coins created by a large language model (LLM) AI agent, and there will certainly be different variations on different themes in the future, but the pioneering themes will generally retain value. So I think GOAT could maintain a market cap of somewhere between $1 billion and $5 billion for quite some time, rather than quickly going to zero like many other meme coins.

Additionally, I'm interested in some projects in the Decentralized Science (DeSci) space, like Worm, which I find both interesting and funny. Other than that, I don't follow many meme coins. I often hear discussions about meme coins, and the young analysts in the Maelstrom chat are always sharing the dynamics of various meme coins. I'll occasionally take a look at something interesting and just buy a little bit. It's a fun game, and I really enjoy it. Of course, I don't invest too much money, as it's purely speculative and gambling. But I find it very insightful, as it allows me to understand human emotions and how those emotions are reflected in the trading charts.

Hikaru: Indeed, regardless of the outcome, one thing we can all agree on is that we're having fun in the process.

Arthur: Exactly, in this universe, we have to enjoy life and hopefully make some money along the way.

Summary Thoughts on Bitcoin's Role in the Current Bull Market

Hikaru: And of course, we've made new friends in the process. The social capital of the meme coin community is very strong, and this won't disappear in the short term.

Arthur: That's true. Social media allows us to share viral memes on the internet, so why not try to make money by predicting the next hot trend?

Hikaru: I completely agree. Alright, Arthur, thank you very much for your sharing. I believe this will be of great significance to cryptocurrency investors around the world, especially with Bitcoin nearing $100,000. However, I have one final question: Do you have any information you'd like to convey to our Korean community and global audience?

Arthur: I think we should continue to buy cryptocurrencies. We are still in a bull market. I know some people think Bitcoin may stagnate after reaching $100,000, but ultimately, every major economy and government has committed to reducing debt through inflation, rather than addressing the structural problems in their economic and political systems.

Given that, we should hold the best-performing asset since the 2008 global financial crisis, which is Bitcoin. Of course, the rest of the cryptocurrencies will follow suit. So don't be discouraged by Trump's unfulfilled crypto policies. He will print money, China will print money, the European Central Bank will print money, Japan will print money, and South Korea will print money too. Every country will print money. So I think we are still in the early stages of an explosive bull market.

Hikaru: I completely agree. I think many governments and financial markets are just using one expedient after another to solve short-term problems, but ultimately, we all know this is not sustainable. And Bitcoin is the only long-term solution that can truly address the root of the problem. Alright, thank you very much, Arthur. We look forward to inviting you to participate in an interview again. Wishing you a successful bull market, and let's see how it turns out!

Arthur: Thank you for the invitation.

Hikaru: Thank you, Arthur.