Arthur Hayes gave a speech at Token 2049. He said that the U.S. Federal Reserve’s decision to cut interest rates will be directly related to the future market direction, but special attention should be paid to the exchange rate of the U.S. dollar against the Japanese yen. Additionally he mentioned that Ethereum might benefit from a rate cut…. (Preliminary summary: Pendle launches new Bitcoin income product, Arthur Hayes predicts: PENDLE will rise to 10 US dollars) (Background supplement: Arthur Hayes is very bearish on Bitcoin: it fell below 50,000 mg this week! Non-agricultural and unemployment data prompted Air Force) "It's fucking fed day", at Token 2049 held in Singapore on September 18, Arthur Hayes, CIO of Maelstrom Fund, delivered a keynote speech focusing on the economic environment of macroeconomics. His first words made the audience scream. Call. In the early morning of September 19th, Beijing time, the U.S. Federal Reserve is about to hold an interest rate meeting. This is also the most important decision this year. The U.S. Federal Reserve’s decision to cut interest rates is directly related to the future market direction. Hayes said there's about a 60% to 70% chance the Fed will opt for a 75- or 50-basis-point rate cut. Hayes made an interesting prediction about the future of ETH, arguing that falling U.S. Treasury rates may indeed make the high-yield token more attractive. He compared Ethereum to "Internet bonds" and further analyzed its potential. He emphasized the Japanese yen many times and reminded everyone to pay attention to the exchange rate of the US dollar against the Japanese yen. "This is the only important thing." The following is the content of the speech compiled live by PANews (refer to AI translation): I think there is about a 60% to 70% chance that the Federal Reserve will choose a 75 or 50 basis point rate cut. Before talking about cryptocurrencies, I would like to express my opinion. I think it is a huge mistake for the US Federal Reserve to choose to cut interest rates in the current situation of increased intervention by the US government. I think the market will collapse in the days after the Fed cuts interest rates as it will narrow the interest rate differential between the dollar and yen. We saw a few weeks ago that the yen dropped from 162 to 142 in about 14 days of trading, almost triggering a mini-financial collapse. Now that the Fed and the market are expecting them to continue cutting interest rates very quickly, we're going to see similar financial stress again. Back to cryptocurrencies.This is one of my favorite trades in my non-crypto portfolio. I hold my Treasury bills and collect interest. That's the yield on the 1-month Treasury bill, which has hovered around 5.5% for more than a year after the Fed stopped raising interest rates. When you have enough capital and are earning a 5.5% return, you don't have to do much. Why take the risk? Why try to add value while risking capital preservation? When people own large amounts of assets, they are reluctant to take certain actions because they can easily make money by holding Treasury bills. This situation has had ripple effects across financial markets, including the cryptocurrency market. I want to ask you, who loses when the interest rate environment changes? When interest rates on short-term Treasury bills fall, the interest income that can be generated by holding the safest risk-free assets is a question worth pondering. The first reaction was a comparison between the five Ethereum assets — which, for the record, I hold a lot of. Fortunately, I'm not invested in any condos, but at the end of the day, this portfolio is well-suited to a falling interest rate environment. Basically, what this means is that I invest in a number of projects that provide users with interest income in various forms. Currently, those yields are either slightly higher or slightly lower than rates on short-term Treasury bills, which is weighing on price performance. After all, why invest in riskier DeFi applications? You could just call a broker and put your money in T-bills and earn 5.5%. Now, there are projects that do very well in a high interest rate environment. I’m just using Ondo as an example, but there are actually many other types of real-world asset (RWA) projects. Basically, the model of these programs is this: "You need to buy Treasury bills, we will buy them, put them in some legal structure, and then give you a certificate that pays interest." These programs are based on interest rates rising and maintaining A high one-way bet. But when interest rates fall, there is little need for such products. Ethereum May Benefit from Rate Cut First, Ethereum. When many people hear Ethereum, they may think that it has not made any big changes.The main discussion point about ETH is that it is considered an "internet bond". If it's an Internet bond yielding 4% per year, and Treasury bills yield more than that, investors will naturally prefer the Treasury bill. But if Treasury yields fall quickly (which I think they will), then Ethereum will become more attractive, and the return I can make by holding Ethereum may exceed what I can make by holding USD. As you can see, interest rates are falling rapidly because the Fed is going to cut rates and the market is going to fall. And then they're going to say, "Let's keep doing this because this is the way to solve the problem." Right now, what we can see is that the yield is basically staying on a line, and Ethereum's yield is between 3% and 3%. Between 4%, that's not enough for a holder, which is why I don't hold it. As you can see, Ethereum has far underperformed Bitcoin in the current bull market. With ETH Staking (ETHfi) you can stake your Ethereum, but apparently this strategy has also taken a hit. Because the return rate after staking is only about 3%, after deducting fees, this return is not ideal. We need Treasury yields to fall faster so that Ethereum’s yields become more attractive. Why is this a minor issue? Because traders use leverage, and they pay for that leverage. This has been going on for many years. This is how I got started in cryptocurrency: building basic trades and applying these strategies. This method is relatively simple, you only need to invest money to earn profits. Again, this is a risky loan and not comparable to the safety of U.S. Treasuries. If you are a yield-seeking investor, and the yields offered by Ethereum are not attractive enough relative to Treasuries, you may not put your assets into this protocol. Here is a chart showing Ethena yields compared to Treasuries, using data from earlier this year. This is very attractive. We see returns of 30%, 40%, 50%, 60%, etc. versus a 5.5% return. I would put my money into this product.But now, its real yield is around 4.5%. So prices have been suppressed because people are asking, why would I put money into a protocol that doesn't yield as well as Treasuries? Another thing we'll discuss is interest rate derivatives agreements, which allow you to trade fixed and floating interest rates. There’s a new product that just launched that allows you to stake your cryptocurrency and earn a fixed income through a loan buyer agreement. While this benefit is attractive, it comes with certain risks. I don't think the yield is high enough to entice a large number of people to switch from the 5.5% Treasury yield to this product. A similar scenario is that if yields fall, more people may be unwilling to take on this interest rate risk. Once again, you can now...