Hayes: AI headwinds will ultimately lead to more money printing

BitMEX co-founder Arthur Hayes expects that a possible downturn in the AI sector will ultimately lead to more money creation by the government, which would boost Bitcoin and other cryptocurrencies. In his latest essay, titled Safety First, Hayes argues that US AI labs such as Anthropic and OpenAI may have another motive behind their appeal to safety considerations to slow the development of artificial general intelligence: demand for AI is disappointing at current price levels.

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In brief:

• Hayes argues that disappointing AI demand could put pressure on the debt market around data centres and chips.
• That could force the government to act as a buyer of last resort for computing capacity or to support insurers, increasing the inflow of dollars.
• Hayes expects Bitcoin and selected other cryptocurrencies to benefit from this.

Less AI investment, more pressure on the debt market

When AI labs spend less on training models, demand for data centres and chips falls. Hayes points out that this affects more than $1 trillion in high-grade corporate bonds and hundreds of billions in lower-rated loans tied to AI infrastructure.

If those investments disappoint and the value of those loans comes under pressure, a credit crisis in the AI sector looms. According to Hayes, that is certainly not an unthinkable scenario if commercial demand for AI products remains structurally below expectations.

Government as saviour, Bitcoin as beneficiary

Hayes sees two possible ways out for the US government. It can itself act as a buyer of computing capacity when the private sector retreats, or it can provide financial support to insurers exposed to AI debt. According to him, both scenarios lead to more dollars in the system.

That increase in dollar inflows is historically favourable for Bitcoin, Hayes argues. The Bitcoin price is currently at $85.5K, up 4.8% in the past 24 hours. Hayes concludes in his essay that the turbulent period in the crypto market after a small rebound in late August is coming to an end, and that both Bitcoin and certain other cryptocurrencies will rise in value as the money supply continues to increase.

Whether the government actually intervenes and what exactly that would look like, Hayes leaves open. His reasoning is that both possible paths, intervention or no intervention, ultimately lead to more money creation. That is a conclusion he also drew earlier in his analyses of capital flows between AI and crypto.