Compilation of the original text: Deep Tide TechFlow
Compilation of the original text: Deep Tide TechFlow
Bankless recently released a podcast "CryptoHayes" discussing about"Arthur Hayes Trades Under the Ethereum Merger Narrative". This post provides a synopsis of the key ideas discussed in the podcast to give readers a quick overview of the spirit.
1. About Arthur's works
Question: Why have I written so many things in recent days?
Writing articles helps me clear my mind, and it's intellectually stimulating, especially when you get opposing opinions from other people. The whole world can see and criticize your article, pointing out issues that were left out in the article.
So writing opens yourself up to criticism from anyone in the world. Then, you'll be a better thinker and investor.
2. About the transaction
Question: Why do you trade instead of HODL?
it's my state of mind, i think"buy and hold"Works for some, but certainly not for me. When I first discovered BTC, I didn't have the mentality to hold BTC for a long time (like 10 years).
I also don't trade on shorter time frames because it is very difficult and takes a lot of effort and time to master it.
3. About macro
Question: What are the main causes of inflation today?
There are two main factors that cause inflation:
During Covid, the government decided that by printing a lot of money and giving it out to people, people bought a lot of things with the money that was sent to them. So this brings inflation because there is too much money supply in the economy.
During the Ukraine war, governments decided to sanction Russia, the world's largest energy exporter.
These two factors are the main cause of inflation, because when you remove the largest exporters from the global economy, things get more expensive. Governments can raise interest rates to curb the monetary component of inflation, but they have a hard time curbing structural inflation caused by energy supply problems.
However, the US is better off than Europe because it has a lot of land to support itself. Maybe Europe can do the same, but it cannot function on an industrial level without energy. A country like Germany, which cannot function without Russian gas, has seen manufacturing prices increase by 40% year-on-year.
In addition, the appreciation of the dollar is very bad for Europe and Japan, because all energy is denominated in dollars, and their import bills will soar.
4. About cryptocurrency
Question: Why cryptocurrency? Why did you become a professional cryptocurrency trader?
We are in a period of monetary technology transformation driven by the cryptocurrency industry. The process of the previous world was from the double-entry bookkeeping method in the 16th century-printing press-printing banknotes-telegraph communication-computers, and then to today's encrypted currency.
We are moving towards a world where money and technology work together, the way Bitcoin has brought about. We are using this new technology to reorganize the way we interact with money in society, and for the first time in history anyone can create their own currency by writing code and publishing it on the internet.
But everyone in the world lives in a different system with different rules. Thus, a cryptocurrency may show value to a particular country in a particular environment, but it may be completely useless to others.
5. About value
Question: How do you measure your worth as a trader? Dollars, Euros, or Bitcoin?
everything i do is for"hydrocarbon". Hydrocarbons are the main source of fuel for human existence. Air conditioners, computers powered by electricity, and food from supermarkets that are flown around the world need hydrocarbons to function.
Your ability to maintain a certain standard of living depends on your use of hydrocarbons.
So it doesn't really matter whether it's bitcoin, dollars, gold, yen or euros, if you can't buy enough hydrocarbons to have the lifestyle you want, then it's not the right portfolio to invest in.
So I want to have claims (money) that can be used for energy, I don't want to hold claims that will depreciate over time, I want to store value relative to hydrocarbons, this will be a long term asset in my portfolio , and it's not necessarily just $BTC and $ETH.
6. Regarding the merger of Ethereum
Question: Why are you paying so much attention to $ETH now?
In fact, the second-largest major currency is moving from PoW to PoS, which is a structural change in the $ETH infrastructure itself. Its circulation will be reduced, and it is the only currency that is doing this conversion while having such a scale.
We already know the combined token distribution schedule and the impact will be similar to the Bitcoin halving. As long as the merger is successful, cash flow is guaranteed.
I love this deal. Even if I can't be sure of the FED's attitude, I can still make money on Ethereum, because the structural changes are huge, and it gives the price enough room to rise, possibly overcoming the negative macro environment.
We can see that although the transaction volume has dropped a lot since the summer of DeFi, it still has the most on-chain activity, there will be people using these applications today and after the merger, and the merger will not be affected by any political decisions and politicians Impact.
7. About the price of Ethereum after the merger
Question: Has the price of the merger been priced in by the market?
Many people still don't believe the merger will happen, including myself, because no one can guarantee 100% that ETH will switch to POS smoothly without any accidents.
The rational way of thinking is:"Show me POS, show me how it works, show me all DApps work like before"。
So, until that happens, it's reasonable to think that the merger probably won't happen.
DavidHoffman.eth said that a negative view of the merger is that it is an over-hyped event and as the merger event approaches, the odds of someone willing to buy $ETH immediately after the merger are very low.
Arthur replied:"You don't have to do anything, the price of ETH will naturally rise"
For example, let's assume that the market's consumption of Ethereum Gas is 100ETH today. After the merger happened, (due to the reduction of ETH production due to the change of consensus mechanism, ETH became more precious) people did not immediately sell as much ETH as before;
However, there is still so much demand for dapps in the market (we still need to consume 100 ETH for Gas). Therefore, we don't need any new buyers to create new usage demand (ETH will always be used as GAS, this usage demand is not affected by the merger, you don't need to increase demand for ETH by adding buyers in the market) .
Unless the number of people using DeFi apps stops growing and dwindles from today's levels, there will be some demand for $ETH to pay for Gas with reduced supply.
Demand is constant, while supply decreases, the price of $ETH increases.
8. Regarding the target price of $ETH
Question: If there is no Price in for the merger, what is your target $ETH price?
I have bought $3,000 calls until the end of the year. I'm not worried about the FED because even with a 20% hike, $ETH is still in demand for dApps, and the supply is lower than the demand.
9. About ETH transactions
Question: How to make this transaction? Spot goods? options? Derivatives?
Increasing leverage may lead to liquidation, but there is also a concept of timing here. You need to have a good view of deal timing and enough confidence in the team's ability to ship the product (POS).
The easiest is obviously spot trading, but you won't get big gains. And if you're going to make these risky bets, you have to be good at timing. The reason I chose the December exercise is that it is usually very liquid and the market usually goes up or down a lot in the fourth quarter.
10. About how traders survive in the market
Question: How do you survive the multiple cycles of cryptocurrency trading?
It's all about position sizing, the main reason 3AC crashed was because they made the wrong trades, they didn't specify their position size properly.
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