Arthur Hayes Says an AI Bust Could Become Bitcoin’s Next Major Liquidity Catalyst

Arthur Hayes believes that the Fed may need to inject liquidity into the economy if the artificial intelligence investment bubble bursts, which would benefit Bitcoin.

In a Sept. 22 essay titled “Safety First,” the BitMEX co-founder said the crypto asset’s future relies on debt financing for the burgeoning sector of artificial intelligence infrastructure.

Hayes questions whether demand for high-end AI services will grow quickly enough to justify heavy investments in data centers, semiconductors and computing power. He interprets new calls from top AI developers to throttle frontier-model development as a sign of demand destruction. However, these calls are made due to cybersecurity and safety concerns.

Also, credit represents a primary source of financing for AI infrastructure, and corporate bonds and private financing tied to AI infrastructure expose it to future cash flow risk. Apollo estimates that around $5 trillion could be spent on AI infrastructure by 2030.

If the demand for A.I. slows, owners of data centers and companies that lend to them could lose money through the private credit and insurance markets. The federal government could step in to support demand for infrastructure or backstop insurers that are exposed to asset price declines.