Arthur Hayes Warns DAT Model Could Trigger “FTX-Like Collapse”

Arthur Hayes Remains Cautious about DAT Models, Bullish on BTC

BitMEX Co-founder Arthur Hayes shared a stark warning against a potential “FTX-like collapse” in the crypto market, driven by the increasing popularity of digital asset treasuries (DATs). Hayes' cautionary stance on DATs adds a layer of complexity to his otherwise optimistic forecast for Bitcoin and the broader crypto market.

BitMEX Co-Founder Remains Cautious about DAT Models

In a recent interview with Kyle Chasse, Arthur Hayes, the former CEO of BitMEX, expressed his pessimistic approach to the increasing adoption of digital assets as a treasury asset. According to him, the growing adoption of DAT models could ultimately trigger a massive debacle, reflecting the downfall of the once-prominent FTX exchange.

Notably, he believes that the DAT “meta-narrative” will continue to evolve in the corporate finance world of traditional finance (TradFi), with each mainstream asset class likely to have only one or two winners. He notes that companies like MicroStrategy in the Bitcoin market have already established themselves as leaders, making it challenging for others to surpass them.

According to Hayes, the key for investors is to understand "corporate finance alchemy," where companies can unlock institutional funding channels by pushing up their stock price, trading volume, and liquidity. This allows them to design diverse capital structure tools, roll more assets onto their balance sheet, and increase shareholder equity.

Arthur Hayes notes that traditional fund managers buy publicly traded companies with crypto assets due to regulatory constraints on direct Bitcoin investment. This could lead to a potential DAT crash when prices fall, creating opportunities for arbitrage funds.

Fed Rate Cut

Despite this warning, Arthur Hayes remains optimistic about the future of the crypto market. This approach is mainly driven by the possibility of the Federal Reserve’s dovish stance. He believes that the Fed will continue cutting interest rates despite potential inflation. This would make it essential to hold hard assets like gold and Bitcoin. He noted,

Therefore, I believe we are already in a rate-cutting cycle. Although I personally believe that inflation will remain sticky over the next 18-24 months, if you don't hold hard assets like gold and Bitcoin, or high-performing US stocks, you will feel the pressure of higher inflation.

He added that the Fed will "print money" through various channels to support the government's agenda, leading to fiat currency depreciation and a likely gradual price increase for BTC due to its fixed supply.

Crypto Market in Mid-Cycle

Further, Arthur Hayes added that the market is currently in the "mid-cycle" where monetary policy shifts and fiscal expansion overlap. He believes that stablecoins will drive funds into DeFi protocols with real yield and cash flow potential. Meanwhile, Bitcoin will serve as a hedge against fiat currency devaluation, added the BitMEX co-founder. Expressing his enthusiasm for BTC, he noted,

“I don't care what others say about the so-called "real economy"; I'm focused on credit, and credit will flow—and ultimately, it will flow to Bitcoin.”