BitMex co-founder Arthur Hayes says Bitcoin (CRYPTO: BTC) retaking $126,000 is a foregone conclusion, arguing that trillions in AI spending and wartime money printing will fuel the rally as the crypto bottomed at $60,000 earlier this year.

AI Spending And War Create Perfect Environment For Bitcoin

Hayes laid out his thesis in a new essay titled “The Butterfly Touch,” arguing that the combination of AI buildout and the US-Iran war creates the perfect environment for Bitcoin.

The political will to win the AI race combined with funding the buildout through printed money and bank loans produces vastly more units of fiat tomorrow than today. 

Hayes explained that as the cost per unit of intelligence declines, the complexity of models and tasks performed by AI agents increases. That means compute consumption increases exponentially, which is the essence of Jevons Paradox.

When Does The AI Orgy End?

Hayes believes two events will occur almost simultaneously and shift opinion about spending trillions on AI buildout.

The first is an IPO or mega merger in the US or China related to tech and AI that is so big and financially irresponsible that the market cannot digest it.

The second event will be the rhetoric of the Democrat challenger in the 2028 US presidential election. Hayes argues that the inflation this mega AI buildout causes in raw materials, labor, and electricity is not very popular in many parts of America.

Every Nation-State For Itself

Hayes argued that the US-Iran war showed that nation-states can no longer depend on American hegemony to ensure the flow of essential commodities.

Sovereign nations will liquidate dollar assets to spend capital on infrastructure, defense, and commodity stockpiling. That creates a problem for US financial markets because of large foreign ownership.

The US Treasury Secretary and other monetary policy makers understand this.

The two popular policy options are to encourage dollar swap lines or alter banking regulations to nudge banks into holding more treasuries. Both expand the amount of dollars in existence.

Bitcoin Bottomed At $60,000, $90,000 Is Next

Bitcoin price bottomed earlier this year at $60,000, and with a tailwind of trillions of dollars and yuan yet to be created, retaking $126,000 is a foregone conclusion, Hayes wrote.

He expects the rally to intensify after Bitcoin punches through $90,000, where many call option writers will rush to cover. Hayes said he will take Maelstrom’s portfolio to maximum risk unless anything drastically changes.

Bitcoin post-February 28th is outperforming other major risky assets such as gold and US tech stocks, Hayes noted.

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