Arthur Hayes Bitcoin 2025 Conference Speech: The BTC Path to $1 Million

Source: Arthur Hayes' keynote speech at Bitcoin 2025 titled "It's F**king Maths"
Translated by: Golden Finance

Task of the US Treasury Secretary

The new US Treasury Secretary is Bessent, who has previously worked with George Soros, helping break several different sovereign currency peg mechanisms. Faced with all of these issues, he understands very well what needs to happen economically for the United States to succeed.

This is a photo of Bessent giving a sales presentation. I believe some of you have seen the movie "Glengarry Glen Ross" and that iconic scene where... I forgot the actor's name, he stands there telling the salespeople ABC—Always Be Closing. So what is Scott Bessent's job? So every time you see him on TV, imagine he is a used car salesman trying to sell you something. What is he selling you? Bonds. His job is to sell bonds because his boss—the US government—needs to finance itself.

So why are bonds a bad investment? The yellow part here is a chart of the total US debt from 2017 onwards. You can see it is benchmarked at 100, and the debt supply has increased by about 80%. I then compared this index to TLT (an ETF tracking long-term bonds) divided by the Nasdaq 100 index. So if the chart goes down, it means that Nasdaq outperformed bonds. From 2017 to now, Nasdaq has outperformed bonds by about 80%. So yes, you may have made money through bond interest, but if you put your money into the stock market, you would have made an additional 80%.

Let's look at the same chart compared to gold. A similar situation. If you did not hold US Treasuries but bought gold instead, your performance would be about 80% better. Obviously, this is not a gold or stock pitch. We are here to talk about Bitcoin. So how does it perform compared to Bitcoin? That is even more striking. By buying Bitcoin instead of bonds, your performance would also surpass bonds.

Therefore, although many investment professionals may come out and tell you, you know, I think the bond market will perform well in the next year or two, and so on, that may be true. You may actually make money by holding bonds, but you will make more money by holding something else. The goal of investing is to maximize the money you make in the current environment, and holding government bonds is not a good trade.

Now, this clearly goes back to my point, which is that Peterson's job has become very difficult because as more and more investors look at these charts and understand that if they continue to hold government bonds, their performance will lag far behind what they could have earned for themselves and their clients, more government action is needed to ensure that the U.S. government can finance itself. So, clearly, after the Trump administration came into power, they talked about the U.S. government having a spending problem.

U.S. Debt Deficit and Inflation

This is a chart from the Peterson Institute, and the U.S. fiscal year starts in October. We can see that as of March this year, despite many efforts and rhetoric to control excessive U.S. government spending, in the 2025 fiscal year, our expenditure has already exceeded that of the 2024 fiscal year, which was a record-breaking deficit year.

Clearly, in the media, we have been discussing at length how certain individuals—whom we will mention later—will control government spending by eliminating fraud and abuse. We discussed for a while, and then the main figure of this effort, the Doge "pioneer" Musk, disappeared. We haven't heard from him for a while because this was bad political maneuvering. Every dollar the government spends goes into someone else's pocket. If you stand up and say we need to cut trillions of dollars from the deficit, it will obviously negatively affect many individuals and businesses. We saw the media and individual backlash to this. Ultimately, I think politicians realized, hey, this is not a good political strategy. Let's recall our "attack dog," let him fade from people's sight, and go run his private company.

But this means that if they cannot meaningfully reduce the deficit, how do you balance the books? Recently, Scott Benson started touring the media, talking about how he is focusing on growth. He is all about pursuing growth. So, when you are facing a massive deficit, what does that mean? It means you need to have the nominal GDP growth rate exceed your interest costs, which is very difficult unless you intend to increase the credit volume in the economy.

Many of you here are Americans or have spent a long time in North America. Most of my adult life has been spent in Greater China. When you live in China, you understand that GDP or growth is simply the output of how much credit you are willing to inject into the economy. If we want to understand how the Trump administration—indeed, any administration in the face of these mathematical facts—would act, we must understand that this economy relies on credit. So, if you are willing to inject more credit into the system, you can achieve any growth target you want. So, if Benson says they want 6% or 7% nominal GDP growth, great, how much credit are you planning to create? We want to know how much credit they intend to create because this is ultimately what causes Bitcoin to outperform all other assets priced in fiat currency.

So how do we move beyond a sustained 7% deficit? What can they do? Typically, authorities would blow another financial bubble. Perhaps that's Bitcoin and cryptocurrency. Politicians take a very loose stance: "Hey, we want our crypto brothers and sisters to become very rich, pay capital gains tax, you know, spend a lot and boost economic performance." They can encourage the banking system to lend to the real economy, which I referred to a few months ago in an article as "Quantitative Easing for Poor People" (QE for poor people). Basically, if the banking system isn't doing financial engineering but using its balance sheet to lend to normal companies, this would create jobs and economic growth.

Now, the problem with these two things is that there is inflation. Inflation is necessary to balance the balance sheet. I know this is an unpopular term in politics and economics, but inflation is necessary for the government to bear its massive debt. So we will face inflation, and obviously everyone here understands that Bitcoin is the best hedge against this. But we need to spread this information worldwide.

The Path to $1 Million Bitcoin

Finally, I want to talk about a few things. The path to $1 million Bitcoin, I believe, has three main aspects.

First is Capital Controls and Tariffs. I recently wrote an article delving into why I think tariffs are a bad political tool because they encourage commodity inflation and empty shelves, which ordinary Americans don't like. But you can achieve the same economic rebalancing goal by using capital controls. So we're starting to see some fringe economists — soon to become mainstream — talk about how they can eliminate certain tax benefits enjoyed by foreigners investing in the US and redistribute that income to voters or use it to buy specific-term Treasury bonds.

The second thing is the Supplementary Leverage Ratio (SLR) exemption, which I will elaborate on later. Scott Bessent has talked about this in several interviews, and recently, in interviews with Bloomberg and Fox News, he has strengthened his language, talking about how he believes this ratio will be exempted this summer, just as large banks were allowed unlimited leverage to buy government bonds during the COVID-19 pandemic.

Lastly, an increasingly discussed area is the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which, if allowed to, would be able to inject a large amount of money into the mortgage market.

Let's look at these "three horses." "Foreigners must pay" is a good political strategy. If you want to tell voters "I'm going to give you something," having someone else foot the bill is obviously even better. Politics around the world operate like this. Back in 1984, because the US government faced another problem, the same problem: how do we get people to buy our debt? At that time, the yield on 30-year government bonds was around 12%. They said, "Hey, why don't we exempt foreign bondholders from withholding tax?" Now, if you're an American, any interest you earn from holding government bonds is taxed at a specific rate, I think around 20% to 30%. But now, if you're a foreigner, you don't have to pay this tax.

So now there is discussion about eliminating this exemption for several purposes. First, by essentially taxing the income that foreigners receive, this could raise over a trillion dollars over ten years. Now, obviously, if you are taxed, you may not want to hold government bonds. So one idea is, can we set a very low tax rate to hold long-term government bonds—these are things that are hard to sell like Beanie Babies—and apply a high tax to short-term government bonds—these are like cash-like instruments you might hold in a money market account. Everyone wants this, everyone wants the high-yielding cash account. So let's punish you for holding short-term government bonds but let you hold long-term government bonds. This is a mild form of yield curve control. How do we get demand for long-term bonds from foreigners? Just change the tax rate.

Now, the ultimate question is who will replace foreigners as marginal holders of the debt. Obviously, this means they will print money to make up for the lost funds from foreigners not investing in these bonds.

One more thing: Bank bond-buying frenzy. Supplementary Leverage Ratio (SLR), if you don't remember anything else from this speech, remember this. This is a way for banks to buy bonds with infinite leverage. There's something called Basel III, which is a very complex regulation developed after the global financial crisis, and it did something smart. It said, hey, banks, you don't have enough capital, why don't we let you have more capital? So if I hold a bond, I have to put in some of my own equity capital. It makes sense. This means U.S. banks will face limits on buying U.S. government bonds. Remember, Beanie needs to sell two trillion or more in bonds every year, he needs to make sure someone can buy those bonds. So if I eliminate this exemption, it allows commercial banks to buy government bonds with infinite leverage. When they can do that, their profits will soar because they pay very low rates to commercial depositors. Obviously, a smiling Jamie Dimon is very eager for this to happen. He has said on multiple occasions that he believes the banking system needs this exemption. As I often say, Jamie Dimon gets what Jamie Dimon wants.

One more thing, stablecoins have clearly been a very hot topic lately. When you combine a stablecoin or a non-interest-bearing U.S. dollar stablecoin issued by a bank in the market with the SLR exemption, they essentially become like Tether. They do not allow people investing in these stablecoins and using them for transfers to pay any fees, and then they can put all that money into U.S. government bonds with no capital requirement. This is basically infinite profit. So I expect that if this exemption passes—I think it will—you will see large U.S. banks very consistently working to issue "orange stablecoins" (referring to stablecoins related to Bitcoin or some Bitcoin-supporting bank) because that is one way for them to earn a lot of net interest income.

This is a post by Trump on "Truth Social" regarding Fannie Mae and Freddie Mac.

Essentially, these are organizations that issued mortgages before the 2008 financial crisis. They were once very profitable. Now, what happens when you release Fannie Mae and Freddie Mac? Essentially, you free them from government receivership. This deal has been discussed for almost two years. If you bought in at one dollar, these companies' market trading price could now be $11. But if you free them from receivership, they are allowed to leverage their equity capital, issue more debt with implicit government guarantees, and leverage it by 33 times. Then they can purchase up to $5 trillion in mortgages. Allowing these two organizations to resume normal operations would bring $5 trillion of liquidity into the market.

Simple Calculation

Where did I get the idea that Bitcoin could reach $1 million?

- If we consider the "Quantitative Easing for the Poor" — banks providing more loans to the real economy — I estimate that from now until 2028, as much as $3 trillion in bank credit could be generated. The statistic to watch for is the "Other Deposits and Liabilities" item on the Federal Reserve's balance sheet each week, where we will see this unfold.

- If banks are allowed to purchase government bonds, an estimated $900 billion in foreign demand may disappear. This must be offset by commercial banks, which can now buy these bonds with unlimited leverage.

- Finally, let's release Fannie Mae and Freddie Mac, bringing $5 trillion of liquidity into the market.

- This would bring us close to printing $9 trillion from now until 2028.

Let's put this into perspective. During the COVID-19 pandemic, the United States' stimulus plans and all the aid given to the financial sector totaled about $4 trillion. From the low point in March 2020 to November 2021, Bitcoin rose by about 10 times.

Remember, price is determined by the margin. What matters is the marginal price, not the entire stock. So, if due to ETF demand we see a reduction in Bitcoin on exchanges, and if the money we print from now until 2028 is double that of the COVID-19 pandemic period, then reaching $1 million for Bitcoin becomes quite easy.

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