Despite experiencing many losses, overall I am still making a profit.

Author: Arthur Hayes, founder of BitMEX Compiled: Deep Tide TechFlow

(Any views expressed in this article are the author's personal opinions and should not constitute the basis for investment decisions, nor should they be considered as recommendations or suggestions for engaging in investment transactions.)

This week has been truly shocking. If you missed the Token2049 conference held in Singapore last week, I feel sorry for you. More than 20000 enthusiastic participants expressed their enthusiasm in various ways. I have participated in almost every race since the start of the Singapore night F1 race, but I have never seen this city so vibrant.

The number of attendees for Token2049 has doubled compared to last year. I heard that some lesser known projects have a speaking fee of up to $650000 on some small stages.

The party venue was crowded with people. Marquee is a club that can accommodate thousands of people. Imagine waiting in line for over three hours to enter the grand event here. Every night, different encryption projects or companies book this club. The booking fee for Marquee is $200000, excluding any drinks.

There are various types of activities available. Iggy Azalea invited a group of strippers from Los Angeles to create a flash mob "experience". Who would have thought that strippers could also know how to operate in a volatile market?

Even Su Zhu, known as the 'Randall of the cryptocurrency world', couldn't help but want to 'make money fly'. Randall， Why do you look so uncomfortable in this video? Losing money is your specialty. When you finally submit your assets to the bankruptcy court in the British Virgin Islands and resolve the lawsuit, I am happy to entertain you at Magic City and teach you how to operate.

I am considering having Branson Cognac and Le Chemin du Roi sponsor my next party, as 50 Cent said:

Every hotel is fully booked, even medium-sized restaurants are no exception. When the data for 2024 is available, I suspect we will find that the cryptocurrency community has brought more business to airlines, hotels, restaurants, conference venues, and nightclubs than any other activity in Singapore's history.

Fortunately, Singapore strives to maintain geopolitical neutrality. This means that as long as you believe in Nakamoto Cong, you can basically celebrate with your brothers and sisters.

The vitality and enthusiasm of cryptocurrency enthusiasts stand in stark contrast to the rigidity and boredom of traditional financial conference participants. The Milken Institute will also hold a conference in the same week. If you walk around the Four Seasons hotel where the conference is held, you will find that every man and woman is dressed similarly, in monotonous business casual or formal attire. The clothing and behavior of traditional finance intentionally remain calm and unchanged. They hope the public will feel that 'there's nothing good here', but in reality, they are stealing human dignity through the inflation imposed by their institutions. Volatility is their enemy, because when things start to fluctuate, ordinary people can see through the mirror the true corruption of their masters.

Today, we will discuss the volatility of cryptocurrencies and the lack of volatility in traditional finance. I want to explore how elites print currency to create a stable economic environment. At the same time, I would like to explain how Bitcoin serves as a release valve to counter the printing of fiat currency aimed at suppressing volatility to unnatural levels. But first of all, I want to illustrate the key point that short-term macroeconomic forecasts are not important by reviewing my records from November 2023 to the present.

50-50

Many readers and keyboard warriors in the cryptocurrency field often criticize my misjudgment. So, how have I performed in major judgments over the past year?

November 2023:

I wrote an article called Bad Gurl. In this article, I predict that US Treasury Secretary 'Bad Girl' Yellen will issue more T-bills to withdraw funds from the Federal Reserve's Reverse Repurchase Program (RRP). The decline in RRP will inject liquidity into the market, thereby driving the rise of risk assets. I believe the market will soften in March 2024, when the Bank Term Financial Plan (BTFP) will expire.

From November 2023 to March 2024, the Reverse Repurchase Program (RRP, white) decreased by 59%, Bitcoin (gold) rose by 77%, the S&P 500 Index (green) rose by 21%, and gold (magenta) rose by 5%. The benchmark for each dataset is 100.

Victory item+1.

After carefully reading the quarterly funding announcement (QRA) from the US Treasury Department, I have decided to increase more cryptocurrency risk. Looking back, this decision was very correct.

March 2024:

In my article Yellen or Talkin, I speculate that bank term financing plans (BTFP) will not be renewed because they clearly have inflationary characteristics. I believe that simply allowing banks to use discount windows is not enough to avoid another US banking crisis that is not too big to fail (TBTF).

The expiration of BTFP has not had a substantial impact on the market.

Loss item+1.

I lost some funds on Bitcoin put options.

April 2024:

In my article Heatwave, I predict that the tax season in the United States will lead to a decline in cryptocurrency prices as the liquidity of the US dollar will be drained. Specifically, I stated that between April 15th and May 1st, I will temporarily suspend any additional cryptocurrency risks.

From April 15th to May 1st, the Reverse Repurchase Program (RRP, white) rose 33%, Bitcoin (gold) fell 9%, the S&P 500 Index (green) fell 1%, and gold (magenta) fell 3%. The benchmark for each dataset is 100.

Victory item+1.

May 2024:

During my summer vacation in the Northern Hemisphere, I published an article called Mayday, which was based on several macroeconomic factors. I have the following predictions:

Did Bitcoin reach a local low of around $58600 earlier this week? yes. What is your price forecast? It is expected that Bitcoin will rise above $60000 and then fluctuate between $60000 and $70000 until August.

Bitcoin fell to a low of around $54000 on August 5th due to a pullback in the US dollar yen arbitrage trade. I made a prediction error with a deviation of 8%.

Loss item+1.

During this period, the price fluctuation range of Bitcoin was approximately $54000 to $71000.

Loss item+1.

During the weak period in summer, I did increase the risk of some 'altcoins'. Some of the currencies I purchased are currently trading at prices lower than when I made the purchase, while others are trading at prices higher than.

June and July 2024:

When Japan's fifth largest bank admitted its huge losses on foreign currency bonds, I wrote an article titled Shikata Ga Nai discussing the importance of the US dollar Japanese yen exchange rate. I predict that the Bank of Japan (BOJ) will not raise interest rates because it would jeopardize the banking system. However, this assumption has been proven to be too naive. On July 31st, the Bank of Japan raised interest rates by 0.15% and initiated a fierce retracement of the US dollar yen arbitrage trade. I followed up on the mechanism of USD JPY arbitrage trading drawdown in the subsequent article Spirited Away.

Although the US dollar yen has been proven to be the most important macroeconomic variable, my assessment of the Bank of Japan (BOJ) was incorrect. The policy response did not turn out as I had predicted. The Bank of Japan did not provide US dollars through the central bank's swap line, but assured the market that it would not take these measures if raising interest rates or adjusting monetary printing policies would lead to increased market volatility.

Loss item+1.

August 2024:

Two major events occurred this month: the US Treasury Department released the QRA for the third quarter of 2024, and Powell's employment data shift in Jackson Hole.

I predict that Yellen's reissue of T-bills will provide dollar liquidity to the market. However, after Powell's turn, he confirmed that there would be a rate cut in September, and these two forces were in opposition to each other. At first, I believed that the net issuance of treasury bonds would increase liquidity as it would lower the reverse repurchase agreement (RRP) to zero, but then the yield of treasury bonds fell below the level of RRP, and I predicted that the repurchase agreement (RPP) would rise and drain liquidity.

I did not anticipate that Powell would cut interest rates before the election, thus risking triggering an inflation explosion during the voter voting period.

Loss item+1.

After the Jackson Hole Conference, the RRP (Reverse Repurchase Agreement) balance increased directly and returned to an upward trajectory. Therefore, I still believe that this will have a slight drag on liquidity, as T-bill yields continue to decline and the market expects the Federal Reserve to further cut interest rates at its November meeting.

The result has not been determined yet; It is too early to judge whether I am correct now.

September 2024:

When I left the Patagonian mountains, I wrote an article called Boom Times... Delayed and predicted in speeches at South Korea's Blockchain Week and Singapore's Token2049 that if the Federal Reserve cuts interest rates, the market will have a negative reaction. Specifically, I point out that the narrowing of the US dollar yen spread will lead to further appreciation of the yen and reignite the closing of arbitrage trades. This will lead to a decline in the global market, including cryptocurrencies, ultimately requiring more currency printing to allow for the reorganization of 'Hamty Dundee'.

The Federal Reserve cut interest rates, while the Bank of Japan (BOJ) kept interest rates unchanged, which narrowed the spread; However, the depreciation of the Japanese yen against the US dollar has led to a strong performance in the risk market.

The loss item increases by+1.

result:

2 correct predictions

6 incorrect predictions

So the accuracy of hitting the ball is. 250. This is quite poor for ordinary people, but as the great Hank Aaron once said, "My motto has always been to keep swinging. Whether I'm in a slump, feeling down, or getting into trouble off the court, the only thing I need to do is keep swinging." Aaron's career batting average was. 305, and he is considered one of the best baseball players of all time.

Despite experiencing many losses, overall I am still making a profit.

Why?

A huge assumption

When I am writing these macro articles, I am trying to predict specific events that will lead to policy responses from our corrupt rulers. We know that due to excessive leverage in the trade and financial systems after the Bretton Woods system in 1971, they were unable to cope with any form of financial market volatility. We - referring to the puppets of traditional finance and the followers of Satoshi Nakamoto - all agree that when things get bad, we will press the 'Brrrr' button. This has always been their policy response.

If I could predict the triggering factors in advance, my self perception would be enhanced, and perhaps I could gain additional profits by advancing some time. But as long as my investment portfolio can benefit from printing fiat currency to suppress the natural fluctuations of human civilization, even if every event driven prediction I make is wrong, as long as policy responses are as expected, it doesn't matter.

I will show you two charts to help you understand the huge amount of fiat currency needed to suppress historical low volatility.

Volatility

Starting from the late 19th century, the elites who controlled global governments reached an agreement with ordinary people. If ordinary people surrender more and more freedom, the "smart" people who manage the country will create a peaceful universe by suppressing entropy, chaos, and fluctuations. With decades of development, the role of government in the lives of every citizen has become increasingly important, and maintaining seemingly increasing order has become very expensive, as our knowledge of the universe continues to increase and the world becomes increasingly complex.

Previously, the books of several authors were regarded as authoritative sources of truth on the workings of the universe. They kill or reject anyone engaged in science. But as we break free from the shackles of organized religion and engage in critical thinking about the universe we inhabit, we realize that we know nothing and that things are much more complex than what you believe by simply reading books such as the Bible, the Torah, and the Quran. Therefore, people have turned to politicians (mostly men, a few women) who have replaced priests, rabbis, and imams (always men), providing a framework that promises a safe lifestyle and understanding of the workings of the universe. However, whenever volatility surges, the reaction is to print currency, cover up various problems that exist in the world, to avoid acknowledging that no one knows what will happen in the future.

Just like when you press an inflatable ball underwater, the deeper you press the ball, the more energy is needed to maintain its position. The distortion on a global scale is so extreme, especially for American hegemony, where the printing money required to maintain the status quo is growing rapidly every year. That's why I can confidently say that the amount of printed currency required from now until the final system reset will far exceed the total amount printed since 1971. This is just the law of mathematics and physics.

The first chart I will show is the MOVE index (white), which measures the relationship between the volatility of the US bond market and the federal funds ceiling rate (green). As you know, I believe quantity is more important than price, but in this case, using price can paint a very clear picture.

You may remember the rise and collapse of the technology foam in 2000. As you can see, the Federal Reserve pricks the foam by raising interest rates until something goes wrong. After the 9/11 attacks in 2000 and 2001, the volatility of the bond market surged. Once volatility rises, the Federal Reserve will cut interest rates. After the decrease in volatility, the Federal Reserve believed that interest rates could be normalized. However, they also punctured the subprime real estate market, leading to the 2008 Global Financial Crisis (GFC). The interest rate quickly dropped to zero and lasted for nearly 7 years to suppress volatility. It was time to normalize interest rates again, and then COVID occurred, which led to the collapse of the bond market and a surge in volatility. The Federal Reserve therefore lowered interest rates to zero. Inflation stimulated by COVID has ignited the bond market since 2021, leading to increased volatility. The Federal Reserve raised interest rates to curb inflation, but had to stop it during the non too big to fail banking crisis in March 2023. Finally, the current loose cycle of the Federal Reserve occurs during a period of increased volatility in the bond market. If we consider the period from 2008 to 2020 as' normal ', then the current volatility of the bond market is close to twice our comfort level.

Let's introduce an indicator of the number of US dollars. The red line is an approximate value of the total bank credit, which is composed of excess bank reserves and other deposits and liabilities (ODL) held by the Federal Reserve, and is a good indicator of commercial bank loan growth. Remember what was mentioned in the Fundamentals of Economics course, it is the banking system that creates money by issuing credit. As the Federal Reserve engages in quantitative easing (QE), excess reserves increase, and as banks issue more loans, ODL is also growing.

As you can see, 2008 was an important turning point. The financial crisis was so huge that the scale of the credit currency eruption masked what happened when the technology foam collapsed after 2000. No wonder our Lord and Savior Satoshi Nakamoto created Bitcoin in 2009. Since then, the total amount of bank credit has never completely decreased. This legal credit cannot be eliminated, otherwise the system will collapse due to its own heavy burden. In addition, in every crisis, banks must create more and more credit to suppress volatility.

I can present a similar chart showing the relationship between foreign exchange volatility of the US dollar against the Chinese yuan (USDCNY), the US dollar against the Japanese yen (USDJPY), the euro against the Japanese yen (EURJPY), and government debt levels, central bank balance sheets, and bank credit growth. In contrast, their clarity is not as good as the chart I just showed. The US hegemony is concerned about the volatility of the bond market, as it is the asset that supports the global reserve currency - the US dollar. All other allies, vassal states, and enemy countries are concerned about the volatility of their own currencies against the US dollar, as it affects their ability to trade with the world.

reaction

All these fiat currencies must go somewhere, and Bitcoin and cryptocurrencies are the release valves for this flow. The legal tender required to suppress volatility will flow into cryptocurrency. Assuming the technology of Bitcoin's memory blockchain is reliable, Bitcoin will always benefit from elites continuing to attempt to violate physical laws. There must be a balancer; You cannot create something from scratch. In this modern digital world, Bitcoin happens to be the most technically reliable way to balance the extravagant behavior of ruling elites.

As an investor, trader, and speculator, your goal is to obtain Bitcoin at the lowest cost possible. This may mean pricing your hourly labor with Bitcoin, using surplus cheap energy for Bitcoin mining, borrowing fiat currency at low interest rates and buying Bitcoin (call Michael Sellers), or using a portion of your fiat savings to buy Bitcoin. The volatility between Bitcoin and fiat currency is your asset, don't waste it by using leverage to buy Bitcoin that you plan to hold for the long term.

Is there any risk involved?

It is very difficult to engage in profit speculation in short-term price fluctuations. As you can see from my records, my success rate is 2-6. If I were to take long and short positions on the entire investment portfolio every time I made a judgment, Maelstrom might have gone bankrupt by now. Randall and Kyle Davies are right; There is indeed a super cycle in which elites suppress volatility. They lack patience and instead borrow fiat currency to purchase more Bitcoin. As the cost of fiat currency funds changes (which always happens), they are trapped and lose everything. However, not everything - I have seen photos of Randall hosting a luxurious party at his mansion in Singapore. But don't worry - it was done in the name of his child to avoid being seized by the bankruptcy court.

Assuming you don't abuse the leverage of fiat currency, the real risk is that when elites can no longer suppress volatility, it will rebound to its natural level. At that time, the system will reset. Will this be a revolution like Bolshevik Russia, where bourgeois holders are completely wiped out, or will it be more common for a group of corrupt elites to be replaced by another, and the suffering of the people to continue under a new 'ism'? Anyway, everything will fall, and Bitcoin's decline relative to its ultimate asset - energy - will be even smaller. Although your overall wealth has decreased, you still perform better than others. Sorry, there is nothing in the universe that is risk-free. Security is just an illusion, promoted by scammers who crave you to vote on election day.

Trading Strategy

U.S.A

Based on the Federal Reserve's historical response to 'high volatility', we know that once they start cutting interest rates, they typically continue to do so until rates approach 0%. In addition, the growth of bank credit must also accelerate synchronously with interest rate cuts. I don't care how strong the economy is, how low the unemployment rate is, or how high inflation is. The Federal Reserve will continue to cut interest rates, and the banking system will release more dollars. Whoever wins the US presidential election, the government will continue to borrow as much as possible to gain the support of civilians until the foreseeable future.

european union

The non elected bureaucrats of the European Union are destroying the economy in a suicidal manner, rejecting cheap and abundant Russian energy, and dismantling their energy production capacity under the guise of "climate change," "global warming," "ESG," or other nonsensical slogans. The economic recession will be addressed by the European Central Bank lowering euro interest rates. Governments around the world will also begin to force banks to issue more loans to local businesses so that they can provide employment opportunities and rebuild deteriorating infrastructure.

China

As the Federal Reserve cuts interest rates and US banks issue more credit, the US dollar will depreciate. This enables the Chinese government to increase credit growth while maintaining stability in the exchange rate between the US dollar and the Chinese yuan. The main concern of the Chinese President regarding the acceleration of bank credit growth is the pressure of RMB depreciation relative to the US dollar. If the Federal Reserve prints money, the People's Bank of China (PBOC) can also print money. This week, the People's Bank of China introduced a series of interest rate reduction measures throughout the monetary system. This is just the beginning; The real 'big trick' will come when banks issue more credit.

Japan

If other major economies are all relaxing monetary policy, then the pressure on the Bank of Japan (BOJ) to quickly raise interest rates will decrease. Bank of Japan Governor Kazuo Ueda has made it clear that he will normalize interest rates. However, as interest rates in other countries have dropped to his low level, he does not need to catch up so quickly.

The moral of this story is that global elites once again suppress the volatility of their countries or economic groups by lowering currency prices and increasing the money supply. If you have fully invested in cryptocurrency, then sit back and relax, and see the fiat value of your investment portfolio rise. If you have excess fiat currency, quickly invest it into cryptocurrency. As for Maelstrom, we will accelerate the progress of projects that have postponed token issuance due to poor market conditions. We hope to see those green candle patterns in our Christmas stockings. And the brothers of the fund hope to have a good 2024 bonus, so please help them!

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